Registration No. 333-1426
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 4215 22-3350958
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number) identification
number)
380 Allwood Road
Clifton, New Jersey 07012
(973) 471-1005
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive offices)
Albert W. Van Ness, Jr.
Chairman of the Board and Chief Executive Officer
Consolidated Delivery & Logistics, Inc.
380 Allwood Road
Clifton, New Jersey 07012
(973) 471-1005
(Name and address, including ZIP Code,
and telephone number, including
area code, of agent for service)
Copy to:
Alan Wovsaniker, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
(973) 597-2500
Approximate date of commencement of proposed sale to the public: From
time to time after the Post-Effective Amendment to the Registration Statement
becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
<TABLE>
<CAPTION>
Calculation of Registration Fee
<S> <C> <C> <C> <C>
- ---------------------------- -------------------------- ---------------------------- -------------------------- --------------------
Proposed Proposed Amount of
Title of Securities Amount to be Maximum Offering Maximum Aggregate Registration
to be Registered Registered Price per Share (1) Offering Price (1) Fee
_--------------------------- -------------------------- ---------------------------- -------------------------- --------------------
Common Stock, par value
$.001 per share 5,000,000 shares $11.44 $57,200,000 $19,725(2)
- ---------------------------- -------------------------- ---------------------------- -------------------------- --------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 on the basis of the
average of the high and low sale prices for a share of Common Stock on the
NASDAQ Stock Market's National Market on February 9, 1996.
(2) Previously paid with the initial filing of the Registration Statement.
The Registrant hereby amends this Post-Effective Amendment No. 1 to its
Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that such Post-Effective Amendment No. 1 to its Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until such Post-Effective Amendment No. 1 to the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
===============================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED August 6, 1998
5,000,000 Shares
CONSOLIDATED DELIVERY & LOGISTICS, INC.
Common Stock
--------------------
This Prospectus covers shares of Common Stock, par value $.001 per
share (the "Common Stock"), of Consolidated Delivery & Logistics, Inc. (the
"Company") which the Company may issue from time to time in connection with its
direct or indirect acquisition of securities and assets of other businesses. The
Company expects that the terms upon which it may issue the shares of Common
Stock covered hereby will be determined through negotiations with the
shareholders or principal owners of the businesses whose securities or assets
are acquired. It is expected that the shares of Common Stock covered hereby that
are issued in connection with such acquisitions will be valued at prices
reasonably related to market prices for the Common Stock prevailing either at
the time an acquisition agreement is executed or at the time an acquisition is
consummated. As of the date of this Prospectus, the Company had issued 50,312
shares of Common Stock under the Registration Statement of which this Prospectus
is a part in connection with acquisitions.
The Common Stock is quoted on the Nasdaq National Market under the
symbol "CDLI." The last reported sale price of the Common Stock on the Nasdaq
National Market on July 31, 1998 was $5.00 per share.
All expenses of this offering will be paid by the Company. No
underwriting discounts or commissions will be paid in connection with the
issuance of the shares of Common Stock covered hereby, although finder's fees
may be paid with respect to specific acquisitions. Any person receiving a
finder's fee may be deemed to be an Underwriter within the meaning of the
Securities Act of 1933, as amended.
See "Risk Factors" beginning on page 5 for a discussion of certain risk
factors that should be considered by prospective purchasers of the Common Stock
offered hereby.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is ________, 1998.
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, the share and per share data in this Prospectus do
not include shares of Common Stock issuable upon (i) the conversion of the
Company's 8% Subordinated Convertible Debentures and 10% Subordinated
Convertible Debentures (collectively, the "Debentures") and (ii) the exercise of
options issued under the Company's Employee Stock Compensation Program (the
"Employee Stock Compensation Program") and the Company's 1995 Stock Option Plan
for Independent Directors (the "Director Plan" and, collectively with the
Employee Stock Compensation Program, the "Stock Option Plans"). Investors should
carefully consider the information set forth under the heading "Risk Factors."
The Company
Consolidated Delivery & Logistics, Inc. (the "Company") was founded in
June 1994 to create a national, full service, same-day ground and air delivery
and logistics company. In November 1995 the Company consummated the acquisition
(the "Combination") of eleven established businesses providing same-day delivery
services (collectively, the "Founding Companies") concurrently with the closing
of its initial public offering (the "Offering"). The Company provides an
extensive network of same-day delivery services to a wide range of commercial,
industrial and retail customers. The Company's ground delivery operations
currently are concentrated on the East Coast, with a strategic presence in the
Midwest and on the West Coast. The Company's air delivery services are provided
throughout the United States and to major cities around the world.
The Company's same-day delivery services are generally divided between
rush and scheduled delivery. Rush delivery typically consists of delivering
time-sensitive packages, such as critical machine parts or emergency medical
devices. Scheduled delivery services, provided on a recurring and often daily
basis, include deliveries from pharmaceutical suppliers to pharmacies, from
manufacturers to retailers, and the interbranch distribution of financial
documents.
The Company offers its customers a single source for their same-day
delivery needs. The Company's strategy is to achieve increased operating
efficiencies by consolidating operations, increasing the density of its delivery
routes and improving the productivity of existing personnel, equipment and
facilities. During 1997, the Company curtailed its acquisition activities to
focus on internal growth, strengthen its management structure and to improve
financial and operational systems. In connection therewith, and in accordance
with the Company's previously announced plans, the Company disposed of its
contract logistics subsidiary and its fulfillment and direct mail operation. In
1998, the Company intends to seek suitable acquisition candidates where the
Company can improve its existing market position or can establish a stronger
market presence.
In connection with the disposal of the Company's fulfillment and direct
mail business, the revenue, cost and expenses, assets and liabilities and cash
flows have been reclassified as discontinued operations in the accompanying
consolidated financial statements. For the year ended December 31, 1997, the
Company had consolidated revenues, income from continuing operations and net
income of $171.5 million, $1.7 million and $459,000, respectively.
The Company believes that the same-day delivery industry, which is
currently serviced by a fragmented system of approximately 10,000 companies, is
undergoing substantial growth and consolidation. The Company believes that
several factors, including the following, are driving the growth and
consolidation of the industry: (i) the trend toward outsourcing non-core
activities, (ii) the shift to single-source providers of regional same-day
delivery services to increase efficiencies and improve service, (iii) increased
customer demand for customized billing, enhanced tracking, storage, inventory
management and just-in time delivery capabilities and (iv) the significant
growth of catalog and at-home shopping and in-home medical care. The Company
believes that large providers of comprehensive delivery services are well
positioned to benefit from these trends.
The Company is a Delaware corporation; its executive offices are
located at 380 Allwood Road, Clifton, New Jersey 07012 and is telephone number
is (973) 471-1005.
<PAGE>
<TABLE>
<CAPTION>
Summary Financial Data
(In thousands, except per share amounts)
Statement of Operations Data:
Combined Founding Companies (4)
------------------------------------
Consolidated
Delivery &
Logistics, Consolidated Delivery
Inc. and Consolidated Delivery & & Logistics, Inc. and
Subsidiaries Pro Forma For Logistics, Inc. and Subsidiaries
For The Years Ended For The Nine For The Year The Period Subsidiaries For The Three Months
December 31, Months Ended Ended Ended For The Years Ended Ended
--------------------- September 30, December 31, December 31, December 31, December 31, March 31, March 31,
1993 1994 1995 1995 (3) 1995 (1)(2) 1996 1997 1997 (7) 1998 (7)
----------- ---------- -------------- ------------- ------------- ------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Revenue $121,752 $136,555 $109,168 $37,322 $146,490 $163,090 $171,502 $40,409 $42,686
Gross
profit 37,715 41,925 32,827 11,286 44,113 40,559 40,925 9,341 9,408
Operating
income (loss) 1,300 2,107 3,971 578 4,549 (1,468) 2,702 (371) 585
Income (loss)
from
continuing
operations(5) 722 867 2,112 (26) 2,086 (854) 1,657 177 241
Net income
(loss) $722 $721 $2,182 ($195) $1,987 ($683) $459 $111 $241
Basic:(6)
Income (loss)
per share
from
continuing
operations ($.02) $.32 ($.13) $.25 $.03 $.04
Net income
(loss) per
share ($.10) $.30 ($.10) $.07 $.02 $.04
============= ============= ============ ============= ============ ========
Diluted:(6)
Income (loss)
per share
from
continuing
operations ($.02) $.31 ($.13) $.25 $.03 $.04
Net income
(loss) per
share ($.10) $.29 ($.10) $.07 $.02 $.04
============= ============= ============ ============== ============= =======
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: Consolidated Delivery & Logistics, Inc.
Combined Founding Companies and Subsidiaries
December 31, December 31, March 31,
--------------------------------- -------------------------------------------- -------------------
1993 1994 1995 1996 1997 1998 (7)
-------------- -------------- -------------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Working capital $3,211 $3,668 $7,948 $5,472 $2,519 $2,835
Equipment and leasehold
improvements, net 3,651 3,023 3,582 3,857 5,667 6,144
Total assets 23,045 23,642 31,856 35,001 36,159 32,304
Long-term debt, net of
current maturities 3,680 1,164 3,027 3,415 2,240 2,511
Stockholders' equity....... 5,212 5,568 8,311 8,730 8,614 8,855
</TABLE>
(1) Reflects the results of operations of the Combined Founding Companies
for the period from January 1 to September 30, 1995 and the results of
operations of Consolidated Delivery & Logistics, Inc. and Subsidiaries for
the year ended December 31, 1995.
(2) The computation of pro forma basic earnings per share for the year ended
December 31, 1995 is based upon (i) 493,869 shares of Common Stock issued
prior to the mergers with the Founding Companies (ii) 2,935,700 shares
issued to the stockholders of the Founding Companies in connection with
such mergers and (iii) 3,200,000 shares sold in the Offering. The
computation of pro forma diluted earnings per share for the year ended
December 31, 1995 is based upon the preceding shares and the dilution
attributable to the Debentures which were convertible into 180,995 shares
of Common Stock. The conversion of the stock options outstanding at
December 31, 1995 is not included in the computation as the effect would be
antidilutive.
(3) The Company selected October 1, 1995 as the effective date of the mergers
with the Founding Companies. The assets and liabilities of the Founding
Companies at September 30, 1995 were recorded by Consolidated Delivery &
Logistics, Inc. at their historical amounts. The statement of operations
includes the results of operations of the Founding Companies from October
1, 1995 through December 31, 1995. The results of operations for
Consolidated Delivery & Logistics, Inc. prior to the mergers are not
significant.
(4) Pro Forma income tax provisions have been provided for certain
Founding Companies.
(5) During 1997, the Company disposed of its fulfillment and direct mail
operation. Accordingly, the operating results and gain on disposition of
the fulfillment and direct mail business have been reclassified as
discontinued operations for the periods presented.
(6) In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standard No. 128 ("SFAS 128") which requires the presentation of
both basic and diluted earnings per share. For the periods presented, basic
and diluted earnings per share have been restated in accordance with the
provisions of SFAS 128.
(7) The consolidated statements of operations for the three months ended
March 31, 1997 and 1998 and the consolidated balance sheet as of
March 31, 1998 are unaudited.
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should consider carefully the
following risk factors as well as the other information presented in this
Prospectus before purchasing the shares of Common Stock offered hereby.
Limited Combined Operating History
The Company was founded in June 1994 and conducted no operations prior
to consummating the acquisition of 11 same-day courier companies in November
1995. Since that time, the Company has acquired several additional businesses.
The businesses acquired by the Company since its formation have all operated as
separate independent entities prior to their acquisition by the Company. The
process of integrating acquired businesses often involves unforeseen
difficulties and may require a significant amount of the Company's financial and
other resources, including management time. The Company may experience delays,
complications and unanticipated expenses in implementing, integrating and
operating the acquired businesses, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Management of Growth
The Company expects to expend significant time and effort in expanding
its existing businesses and identifying, acquiring and integrating acquisitions.
There can be no assurance that the Company's management and financial reporting
systems, procedures and controls will be adequate to support the Company's
operations as they expand. Any future growth also will impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate additional management and employees. There can
be no assurance that such additional management and employees will be identified
and retained by the Company. To the extent that the Company is unable to manage
its growth efficiently and effectively, or is unable to attract and retain
additional qualified personnel, the Company's business, financial condition and
results of operations could be materially adversely effected.
Risks Relating to the Company's Acquisition Strategy
In 1997 the Company curtailed its acquisition activity, however, one of
the Company's growth strategies for 1998 is to increase its revenues and
profitability and expand the markets it serves through the acquisition of
additional same-day air and ground delivery businesses. Several large, national
publicly traded companies have begun to consolidate the delivery industry. There
can be no assurance that the Company will be able to compete effectively for
acquisition candidates on terms deemed acceptable to the Company. There also can
be no assurance that the Company will be able to successfully convert the
systems of these businesses to the Company's existing systems and integrate such
businesses into the Company without substantial costs, delays or other
operational or financial problems. Acquisitions involve a number of special
risks, including possible adverse effects on the Company's operating results and
the timing of those results, diversion of management's attention, dependence on
retention, hiring and training of key personnel, risks associated with
unanticipated problems or legal liabilities, and the realization of intangible
assets, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations, particularly
in the fiscal quarters immediately following the consummation of such
transactions. To the extent that the Company is unable to acquire additional
same-day delivery companies or integrate such businesses successfully, the
Company's ability to expand its operations and increase its revenues and
earnings to the degree desired could be reduced significantly.
The Company currently intends to finance future acquisitions by using a
combination of shares of its Common Stock, notes and cash. In the event that the
Common Stock of the Company does not maintain a sufficient market value, or
potential acquisition candidates are unwilling to accept the Company's Common
Stock as part of or all of the consideration to be paid for their business, the
Company may be required to utilize its cash resources, if available, to maintain
its acquisition program. If the Company has insufficient cash resources to
pursue acquisitions, its growth could be limited unless it is able to obtain
additional capital through debt or equity financing. There can be no assurance
that the Company will be able to obtain such financing if and when it is needed
or that, if available, such financing can be obtained on terms the Company deems
acceptable. The inability to obtain such financing could negatively impact the
Company's acquisition program and could have a resulting material adverse effect
on the Company's business, financial condition and results of operations. The
terms of the Company's existing Revolving Credit Facility restrict the Company's
ability to make acquisitions.
Risks Associated With the Same-Day Delivery Industry; General Economic
Conditions
The Company's revenues and earnings are especially sensitive to events
that affect the delivery services industry, including extreme weather
conditions, economic factors affecting the Company's significant customers,
increases in fuel prices and shortages of or disputes with labor, any of which
could result in the Company's inability to service its clients effectively. In
addition, demand for the Company's services may be negatively impacted by
downturns in the level of general economic activity and employment. The
development and increased popularity of facsimile machines and electronic mail
via the Internet has reduced the demand for certain types of delivery services,
including those offered by the Company. As a result, same-day delivery
companies, including the Company, have changed focus to those delivery services
involving items that are unable to be delivered via alternative methods. There
can be no assurance that similar industry-wide developments will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Dependence on Technology
The Company's business is dependent upon a number of different
information and telecommunication technologies. Any impairment of the Company's
ability to process transactions on an accurate and timely basis could result in
the loss of customers and diminish the reputation of the Company. The Company
intends to integrate its subsidiaries' separate operating systems to an
integrated Company-wide system. There can be no assurance that the contemplated
integration and conversion of these systems will be successful or completed on a
timely basis or without unexpected costs. Any of the foregoing could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Independent Contractors and Employee Owner/Operators
From time to time, federal and state authorities have sought to assert
that independent contractors in the transportation industry, including those
utilized by the Company, are employees, rather than independent contractors.
Similar assertions have been made against a subsidiary of the Company. The
Company believes that the independent contractors utilized by the Company are
not employees under existing interpretations of federal and state laws. However,
there can be no assurance that federal and state authorities will not challenge
this position, or that other laws or regulations, including tax laws, or
interpretations thereof, will not change. If, as a result of any of the
foregoing, the Company were required to pay for and administer added benefits to
independent contractors the Company's operating costs could substantially
increase.
In addition, certain of the Company's employees own and operate their
own vehicles in the course of their employment. In certain cases, the Company
pays those employees for all or a portion of the costs of operating those
vehicles. The Company believes that these arrangements do not represent
additional compensation to those employees. However, there can be no assurance
that federal and state taxing authorities will not seek to recharacterize some
or all of such payments as additional compensation. If such amounts were
recharacterized, the Company could have to pay additional employment-related
taxes on such amounts.
Claims Exposure
The Company utilizes the services of approximately 2,000 drivers. From
time to time such drivers are involved in accidents. The Company currently
carries liability insurance of $1 million for each such accident (subject to
applicable deductibles), carries umbrella coverage up to $25 million in the
aggregate and requires its independent contractors to maintain liability
insurance of at least the minimum amounts required by state and federal law.
However, there can be no assurance that claims against the Company will not
exceed the amount of coverage. If the Company were to experience a material
increase in the frequency or severity of accidents, liability claims or workers'
compensation claims, or unfavorable resolutions of claims, the Company's
operating results could be materially affected. In addition, significant
increases in insurance costs could reduce the Company's profitability.
Competition
The markets for the Company's same-day ground air delivery and
logistics services are highly competitive. Price competition is often intense,
particularly in the market for basic delivery services where entry barriers are
low. In addition the Company competes with a large number of other entities and
while the Company believes that it competes effectively with these other
entities, there can be no assurances that the Company will maintain its
competitive position in its principal markets.
Shares Eligible for Future Sale
The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the public market. As of June 30,
1998, 6,637,517 shares of Common Stock were issued and outstanding, 3,250,312 of
which were registered and eligible for resale by the holders thereof. The
remaining shares may only be sold in transactions registered under the
Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an
exemption from registration, including the exemption contained in Rule 144 under
the Securities Act.
As of June 30, 1998, the Company had outstanding under its stock option
plans options to purchase an aggregate of 1,022,192 shares of Common Stock,
722,824 of which were exercisable as of that date. The shares of Common Stock
issuable upon the exercise of such options have been registered under the
Securities Act and, as a result, will be eligible for resale in the public
market, unless held by affiliates of the Company.
Reliance on Key Personnel
The Company's operations are dependent on the continued efforts of its
senior management. Furthermore, the Company will likely be dependent on the
senior management of companies that may be acquired in the future. If any of
these people elect not to continue in their present roles, or if the Company is
unable to attract and retain other skilled employees, the Company's business
could be adversely affected.
Permits and Licensing
The Company's delivery operations are subject to various state, local
and federal regulations that in many instances require permits and licenses.
Failure by the Company to maintain required permits or licenses, or to comply
with applicable regulations, could result in substantial fines or possible
revocation of the Company's authority to conduct certain of its operations.
No Future Dividends
The Company does not anticipate paying any cash dividends on shares of
the Common Stock in the foreseeable future and intends to retain future
earnings, if any, for use in its business. In addition, the Company's ability to
pay cash dividends on the Common Stock is limited by the terms of its Revolving
Credit Facility.
Effect of Certain Charter Provisions
The Board of Directors of the Company is empowered to issue preferred
stock without stockholder action. The existence of this "blank-check" preferred
stock could render more difficult or discourage an attempt to obtain control of
the Company by means of a tender offer, merger, proxy contest or otherwise and
may adversely affect the prevailing market price of the Common Stock. The
Company currently has no plans to issue shares of preferred stock. In addition,
Section 203 of the Delaware General Corporation Law restricts certain persons
from engaging in business combinations with the Company.
At the Company's 1998 Annual Meeting of Stockholders held in June 1998,
the stockholders approved a proposal to ratify an amendment to the Company's
By-laws and created staggered terms for the Board of Directors. Pursuant to the
by-laws amendment, only one-third of the Board will be subject to election at
each annual meeting of the stockholders.
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is included for quotation on the Nasdaq National
Market under the symbol "CDLI." The following table sets forth the high and low
sales prices for the Common Stock for the periods indicated.
<TABLE>
<S> <C> <C>
1996 Low High
First Quarter $ 5.75 $ 12.25
Second Quarter 4.75 9.25
Third Quarter 4.25 6.63
Fourth Quarter 4.00 5.88
1997 Low High
First Quarter $ 1.88 $ 5.00
Second Quarter 1.63 4.00
Third Quater 2.13 3.63
Fourth Quarter 2.19 4.00
1998 Low High
First Quarter $ 2.38 $ 5.50
Second Quarter 4.13 5.69
</TABLE>
On July 31, 1998, the last reported sale price of the Common Stock was
$5.00 per share. As of July 31, 1998, there were approximately 156 shareholders
of record of Common Stock.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock.
The Company currently intends to retain earnings to support its growth strategy
and does not anticipate paying dividends in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, results of operations, current and anticipated cash needs
and plans for expansion. The Company's ability to pay cash dividends on the
Common Stock is also limited by the terms of its Revolving Credit Facility. See
"Risk Factors - No Future Dividends" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
<PAGE>
SELECTED FINANCIAL DATA (1)
(In thousands, except per share amounts)
Consolidated Delivery & Logistics, Inc. ("CD&L") was founded in June
1994. In November 1995, simultaneously with the closing of CD&L's initial public
offering (the "Offering") separate wholly-owned subsidiaries of CD&L merged (the
"Merger") with each of the eleven acquired businesses (the "Founding
Companies"). Consideration for the acquisition of these businesses consisted of
a combination of cash and common stock of CD&L, par value $0.001 per share. The
assets and liabilities of the acquired businesses at September 30, 1995, were
recorded by CD&L at their historical amounts.
The statement of operations data shown below for the years ended
December 31, 1993, 1994 and for the nine month period ended September 30, 1995
and the balance sheet data as of December 31, 1993 and 1994 are that of the
Combined Founding Companies prior to the Merger (the "Combined Founding
Companies") on a historical basis. During the periods presented, the Combined
Founding Companies were not under common control or management and some were not
taxable entities. Therefore the data presented may not be comparable to or
indicative of post-Merger results to be achieved by the Company after the
Mergers.
The selected financial data with respect to Consolidated Delivery &
Logistics, Inc.'s consolidated statement of operations for the years ended
December 31, 1995, 1996 and 1997 and with respect to Consolidated Delivery &
Logistics, Inc.'s consolidated balance sheet as of December 31, 1996 and 1997
have been derived from Consolidated Delivery & Logistics, Inc.'s consolidated
financial statements that appear elsewhere herein. The selected financial data
with respect to Consolidated Delivery & Logistics, Inc.'s condensed consolidated
statement of operations for the three months ended March 31, 1997 and 1998 and
with respect to Consolidated Delivery & Logistics, Inc.'s condensed consolidated
balance sheets as of March 31, 1998 have been derived from Consolidated Delivery
& Logistics, Inc.'s unaudited condensed consolidated financial statements that
appear elsewhere herein, which, in the opinion of management, reflect all
adjustments that are necessary for a fair presentation of the results of
operations for the interim periods presented. The results of operations for the
three-month period ended March 31, 1988 are not necessarily indicative of the
results to be expected for the entire year. The financial data provided below
should be read in conjunction with these accompanying financial statements and
notes thereto as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
(In thousands, except per share amounts)
Statement of Operations Data:
Combined Founding Companies (4)
------------------------------------
Consolidated
Delivery &
Logistics, Consolidated Delivery
Inc. and Consolidated Delivery & & Logistics, Inc. and
Subsidiaries Pro Forma For Logistics, Inc. and Subsidiaries
For The Years Ended For The Nine For The Year The Period Subsidiaries For The Three Months
December 31, Months Ended Ended Ended For The Years Ended Ended
--------------------- September 30, December 31, December 31, December 31, December 31, March 31, March 31,
1993 1994 1995 1995 (3) 1995 (1)(2) 1996 1997 1997 (7) 1998 (7)
----------- ---------- -------------- ------------- ------------- ------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Revenue $121,752 $136,555 $109,168 $37,322 $146,490 $163,090 $171,502 $40,409 $42,686
Gross
profit 37,715 41,925 32,827 11,286 44,113 40,559 40,925 9,341 9,408
Operating
income (loss) 1,300 2,107 3,971 578 4,549 (1,468) 2,702 (371) 585
Income (loss)
from
continuing
operations(5) 722 867 2,112 (26) 2,086 (854) 1,657 177 241
Net income
(loss) $722 $721 $2,182 ($195) $1,987 ($683) $459 $111 $241
Basic:(6)
Income (loss)
per share
from
continuing
operations ($.02) $.32 ($.13) $.25 $.03 $.04
Net income
(loss) per
share ($.10) $.30 ($.10) $.07 $.02 $.04
============= ============= ============ ============= ============ ========
Diluted:(6)
Income (loss)
per share
from
continuing
operations ($.02) $.31 ($.13) $.25 $.03 $.04
Net income
(loss) per
share ($.10) $.29 ($.10) $.07 $.02 $.04
============= ============= ============ ============== ============= =======
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: Consolidated Delivery & Logistics, Inc.
Combined Founding Companies and Subsidiaries
December 31, December 31, March 31,
--------------------------------- -------------------------------------------- -------------------
1993 1994 1995 1996 1997 1998 (7)
-------------- -------------- -------------- ------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Working capital $3,211 $3,668 $7,948 $5,472 $2,519 $2,835
Equipment and leasehold
improvements, net 3,651 3,023 3,582 3,857 5,667 6,144
Total assets 23,045 23,642 31,856 35,001 36,159 32,304
Long-term debt, net of
current maturities 3,680 1,164 3,027 3,415 2,240 2,511
Stockholders' equity....... 5,212 5,568 8,311 8,730 8,614 8,855
</TABLE>
(1) Reflects the results of operations of the Combined Founding Companies
for the period from January 1 to September 30, 1995 and the results of
operations of Consolidated Delivery & Logistics, Inc. and Subsidiaries for
the year ended December 31, 1995.
(2) The computation of pro forma basic earnings per share for the year ended
December 31, 1995 is based upon (i) 493,869 shares of Common Stock issued
prior to the Mergers, (ii) 2,935,700 shares issued to the stockholders of
the Founding Companies in connection with the Mergers and (iii) 3,200,000
shares sold in the Offering. The computation of pro forma diluted earnings
per share for the year ended December 31, 1995 is based upon the preceding
shares and the dilution attributable to the debentures which were
convertible into 180,995 shares of Common Stock. The conversion of the
stock options outstanding at December 31, 1995 is not included in the
computation as the effect would be antidilutive.
(3) The Company selected October 1, 1995 as the effective date of the Merger.
The assets and liabilities of the Founding Companies at September 30, 1995
were recorded by CD&L at their historical amounts. The statement of
operations includes the results of operations of the Founding Companies
from October 1, 1995 through December 31, 1995. The results of operations
for Consolidated Delivery & Logistics, Inc. prior to the Mergers are not
significant.
(4) Pro Forma income tax provisions have been provided for certain
Founding Companies.
(5) During 1997, the Company disposed of its fulfillment and direct mail
operation. Accordingly, the operating results and gain on disposition of
the fulfillment and direct mail business have been reclassified as
discontinued operations for the periods presented.
(6) In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standard No. 128 ("SFAS 128") which requires the presentation of
both basic and diluted earnings per share. For the periods presented, basic
and diluted earnings per share have been restated in accordance with the
provisions of SFAS 128.
(7) The consolidated statements of operations for the three months ended
March 31, 1997 and 1998 and the consolidated balance sheet as of
March 31, 1998 are unaudited.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Disclosure Regarding Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information contained in this
Prospectus includes information that is forward looking, such as the Company's
expectations for future performance, its growth and acquisition strategies, its
anticipated liquidity and capital needs and its future prospects. The matters
referred to in such forward looking statements could be affected by the risks
and uncertainties related to the Company's business. Actual results may vary
from these forward-looking statements due to many factors including but not
limited to: lack of satisfactory acquisition candidates and/or an inability to
conclude acquisitions on satisfactory terms, acquisition limitations under the
terms of the existing credit facility, inability to obtain acquisition financing
on satisfactory terms, inability to negotiate and obtain waivers of default or
acceptable revisions to loan covenants with the Company's primary lender under
the existing credit facility, the effect of economic and market conditions, the
ability of the Company to execute its strategic plan, the impact of competition
and the Company's reported results varying materially from management's current
expectations. Investors are further cautioned that the Company's financial
results can vary from quarter to quarter, and the financial results reported for
the first quarter of 1998 may not necessarily be indicative of future results.
Overview
The Consolidated Financial Statements of the Company and the Condensed
Consolidated Financial Statements of the Company, including all related notes,
which appear elsewhere in this Prospectus should be read in conjunction with
this discussion of the Company's results of operations and its liquidity and
capital resources. On December 31, 1997, the Company entered into an agreement
to sell certain assets of its fulfillment and direct mail business and thereby
executed its previously announced plan to discontinue providing such services.
Accordingly, the financial position, results of operations and cash flows of the
Company's fulfillment and direct mail business have been reclassified as
discontinued operations in the accompanying consolidated financial statements.
The Company's results in 1997 were impacted by the sale of its contract
logistics subsidiary which accounted for $4.6 million in revenue for 1996 and
$400,000 to the date of its sale in January 1997.
Results of Operations 1997 compared with 1996
Revenue increased $8.4 million, or 5.2%, from $163.1 million in 1996 to
$171.5 million for the year ended December 31, 1997. Were it not for the
decrease in revenue attributable to the sale of the contract logistics
subsidiary, revenue would have reflected an increase of $12.6 million, or 7.9%,
from $158.5 million in 1996 to $171.1 million for the year ended December 31,
1997.
Air courier revenue increased $4.7 million, or 9.1% and ground delivery
revenue increased $7.9 million, or 7.4% for the year 1997 over the year 1996.
Air courier revenue benefited from the expansion and internal growth of existing
accounts as well as the full year contribution of acquisitions made by the
Company during 1996. Ground delivery revenue increased by $3.9 million from the
addition of time service and facilities management revenue as a result of
previously disclosed acquisitions and the addition of several new contract
distribution routes in the pharmaceutical, electronic repair and office products
industries. The increases in ground delivery revenue discussed above were offset
by a decrease of $1.7 million in the Company's banking division due to continued
industry consolidation. Two of the Company's largest banking customers merged,
decreasing their branch network and the number of stops required.
The Company believes this upward trend in ground and air delivery
revenue will continue in the future as a result of internal growth and its focus
on selective and strategic acquisitions in 1998. While Company management
restricted its acquisition activity in 1997, the goal for 1998 is to focus on
selective and strategic acquisitions where the Company can enhance current
operations or expand into certain new market areas.
Cost of revenue includes, among other things, payment to employee
drivers, owner operators and independent contractors as well as agents,
airfreight carriers, commercial airlines, and pick-up and delivery fees. These
costs increased by $8.1 million, or 6.6% from $122.5 million for the year 1996
to $130.6 million for the year ended December 31, 1997. The increase in cost of
revenue is due to several factors which include significant start-up costs in
connection with new contracts added in the pharmaceutical and office products
distribution industries as well as an increase in costs necessary to support a
growing revenue base in ground delivery. The Company was impacted early in 1997
by airline fuel surcharges as well as a change in the general business mix which
reduced certain consolidation opportunities in selected air freight shipments in
the Company's major markets.
As a result of the above, gross profit increased by $366,000, or 0.9%,
from $40.6 million for 1996 to $40.9 million for the year ended December 31,
1997. Excluding the effect on gross profit of the contract logistics subsidiary,
gross profit would have increased by $1.0 million or 2.5% from $39.8 million for
1996 to $40.8 million for 1997.
Selling, general and administrative expenses ("S,G&A") includes
salaries, sales commissions and travel to support the Company's marketing and
sales effort. Also included are the expenses of maintaining the Company's
information systems, human resources, financial, legal, procurement and other
administrative functions. S,G&A decreased by $3.8 million, or 9.0% from $42.0
million in 1996 to $38.2 million in 1997. The sale of the Company's contract
logistics subsidiary accounts for $1.4 million of that decrease. In the fourth
quarter of 1996, the Company recorded a special charge of $1.4 million which
included contract and salary settlements, abandonment of operating leases and
other costs associated with management headcount reduction and other
consolidation issues. The 1996 restructuring charge included in S,G&A resulted
in a net reduction of S,G&A costs of approximately $700,000 in 1997. The balance
of the reduction is principally the result of reduced salaries at the operating
regions due to continued internal consolidation.
As a result of the above, operating income increased for the year ended
December 31, 1997 by $4.2 million from a loss of $1.5 million in 1996 to an
operating profit of $2.7 million in 1997. When excluding the results of the
Company's contract logistics subsidiary which was sold in early 1997, operating
income would have increased $3.5 million. The gain recognized by the Company on
the aforementioned sale of its contract logistics subsidiary in January 1997
amounted to $816,000 before applicable taxes.
Interest expense increased by $339,000 from $805,000 in 1996 to $1.1
million for the year ended December 31, 1997. The increase is primarily due to
an overall increase in the level of borrowing by the Company during 1997 as
compared to 1996. To a lesser extent, the Company was also subject to interest
rate increases during the first quarter of 1997 with its previous lenders prior
to the establishment of its current Revolving Credit Facility (See Note 9 to the
accompanying consolidated financial statements).
Non-comparability of results of operations 1996 compared to 1995
Because the acquired companies operated as separate independent entities
prior to their acquisition, comparisons between the consolidated results of the
Company for the year ended December 31, 1996 and the pro forma combined
historical results of the acquired companies for the year ended December 31,
1995, are difficult to make for numerous reasons, including the following:
1. In 1996, the acquired companies were all subsumed within the common
management of the Company. This resulted among other things in
a) each subsidiary being subjected to an administrative charge,
b) reallocation of costs, such as, for instance, common insurance
being acquired for the Company and its subsidiaries as a whole, and
c) the subsidiaries being relieved of the necessity of performing
various administrative functions for themselves.
2. In 1996, the Company began the process of merging and rationalizing
operations of the previously unrelated acquired Companies.
3. The Company incurred approximately $4.5 million in expenses during 1996
related to corporate overhead and the costs of operating as a public
company, compared to approximately $300,000 in 1995.
4. Most of the acquired Companies were operated as Subchapter S corporations
prior to their acquisition.
The selected financial data presented in this report includes the actual
financial results of the Company for the years ended December 31, 1997, 1996 and
1995. The pro forma combined historical results reflect the combined operations
of the acquired Companies for the period from January 1 to September 30, 1995
and the results of operations of Consolidated Delivery & Logistics, Inc. and
Subsidiaries for the year ended December 31, 1995. For all the reasons set forth
above and others, combined results are not indicative of results that would have
been achieved if the acquired Companies had actually been combined during those
periods, and may not be comparable to or indicative of future performance.
Nonetheless, the following section discusses consolidated 1996 results compared
to pro forma combined historical 1995 results to indicate general trends
affecting operations. The following section should be read with the foregoing
caveats as to non-comparability in mind.
Results of Operations 1996 compared to 1995
Consolidated Delivery's revenue increased 11.3 % to $163.1 million in
1996 from $146.5 million in 1995. In spite of the loss of significant revenue in
the Company's contract logistics subsidiary, the Company achieved revenue growth
in all other areas of its business. Revenue in ground delivery, including rush,
scheduled and distribution increased 11.4 % from $91.4 million in 1995 to $101.8
million in 1996. Air courier produced a 22.1 % increase to $52.0 million in 1996
from $42.6 million in 1995. Revenue in the Company's logistics business declined
by 25.6% from $12.5 million in 1995 to $9.3 million in 1996. Contract logistics
revenue contributed to the overall decline in logistics revenues by $3.5 million
due to the cancellation and/or non-renewal of several long-term contractual
relationships. The significant decline in contract logistics revenues during
1996 contributed to the Company's decision to sell its contract logistics
subsidiary early in 1997.
Ground delivery revenue benefited from the acquisition of three
companies in the Northeast during 1996. In 1996, internal growth of the air
courier business was augmented by the acquisition of two companies, which
solidified and expanded the New York to Los Angeles air route.
The increase in cost of revenue during 1996 caused the Company's gross
profit percentage to decline from 30.1% in 1995 to 24.9% in 1996. Among other
factors contributing to the increase in 1996 cost of revenue is a change in the
Company's general business mix to lower margin business, mobilization and
start-up costs for several large distribution contracts and the effect of fuel
surcharges from several air carriers.
S,G&A increased by $2.4 million, or 6.1%, from $39.6 million for 1995
to $42.0 million for the year ended December 31, 1996. The increase for 1996
included the addition of $4.2 million in expenses necessary to the establishment
and maintenance of the Company's corporate and administrative infrastructure as
a public company. During the fourth quarter of 1996, the Company recognized the
impact of several non-recurring charges totaling approximately $1.4 million
which included salary and contract settlements, abandonment of operating leases
and other costs associated with management headcount reduction and other
consolidation issues.
For the reasons described above, including the decline in gross profit
and the increase in selling, general and administrative expenses including the
impact of non-recurring charges, operating income decreased from operating
income of $4.5 million in 1995 to an operating loss of $1.5 million in 1996.
Interest expense decreased by 8.7 % from $882,000 for the year ended
December 31, 1995 to $805,000 for the year ended December 31, 1996. This
decrease results from refinancing of the pre-combination debt of the acquired
companies which carried higher interest rates than the Company's Credit
Agreement (See Liquidity and Capital Resources).
As a result of the foregoing the Company recorded a net loss of
$683,000 in 1996, compared to net income of $2.0 million in 1995.
As a result of the losses in 1996, the Company instituted certain
actions including the sale of its contract logistics subsidiary, elimination of
redundant overhead and the design of more effective financial and operating
management information systems. The Company also implemented a management
compensation system based on business unit results for 1997.
Results of Operations First Quarter 1998 Compared to First Quarter 1997
Revenue for the first quarter of 1998 increased by $2.3 million, or
5.7% to $42.7 million from $40.4 million for the first quarter of 1997. Revenue
in the Company's ground delivery divisions contributed to the increase primarily
due to newly added customers combined with an expansion of routes with existing
customers in the contract distribution business in the Northeast and Southeast
regions. Air courier revenue remained unchanged at $13.4 million for the first
three months of 1998 and 1997.
Cost of revenue increased by $2.2 million, or 7.1%, to $33.3 million
for the first three months of 1998 from $31.1 million for the first three months
of 1997. The increase in revenue from contract distribution business described
above typically produces higher initial costs, which caused a greater increase
in cost of revenues (7.1%) when compared to the increase in revenue (5.7%).
These costs tend to lower as additional volume or new contracts are added
thereby increasing route density.
Selling, general and administrative expenses decreased by $900,000, or
9.3%, to $8.8 million from $9.7 million for the first three months of 1998 and
1997, respectively. The Company's ground delivery division contributed
approximately $579,000 and the air delivery division $321,000 of the decrease
reflecting the Company's continuing policy of consolidation and cost reduction.
As a result of the matters discussed above, operating income increased
by $956,000 to operating income of $585,000 from a loss of $371,000 for the
first three months of 1998 and 1997, respectively.
Income from continuing operations before income taxes increased by
$105,000, or 35.5%, to $401,000 for the first quarter of 1998 from $296,000 in
the first quarter of 1997. Income from continuing operations before income taxes
for the first quarter of 1997 included a gain of $816,000 recognized on the
disposition of the Company's contract logistics subsidiary.
Liquidity and Capital Resources
Working capital increased by $300,000 to $2.8 million at March 31, 1998
from $2.5 million at December 31, 1997. Cash and cash equivalents decreased by
$959,000 to $853,000 at March 31, 1998 from $1.8 million as of December 31,
1997. The decrease in cash is primarily due to a reduction in Company debt of
$3.4 million and acquisition of equipment and leasehold improvements in the
amount of $1.0 million, which is offset by cash provided by Company operations
of $3.4 million.
As described in Note 2 of the condensed consolidated financial
statements included herein, the Company was not in compliance with one of its
loan covenants as of and for the three month period ended March 31, 1998. The
Company has obtained a waiver from the lending institution for such
non-compliance. The Company intends to negotiate appropriate changes in such
loan covenant.
Capital expenditures amounted to $1.0 million and $274,000 for
the first quarter of 1998 and 1997, respectively.
Effective April 1, 1998 the Company converted $740,000 of its $2
million 8% Subordinated Convertible Debentures to 10% Subordinated Convertible
Debentures and issued an additional $150,000 of the 10% Subordinated Convertible
Debentures. Pursuant to an agreement with the Company's lender, First Union
National Bank, the conversion will not affect availability under the terms of
the Company's credit facility. At March 31, 1998 the Company had $4.8 million
available under its credit facility.
Discussions are underway with the Company's primary lender to provide
additional financing to fund the Company's anticipated acquisition program for
which negotiations are currently being conducted with several acquisition
candidates.
Management believes that cash flows from operations, together with its
borrowing capacity, are sufficient to support the Company's operations and
general business and liquidity requirements for the foreseeable future.
Recently Issued Accounting Pronouncements
In the fourth quarter of 1997, the Company adopted Financial Accounting
Standard No. 128 ("SFAS 128") which requires the presentation of both basic and
diluted earnings per share. Basic and diluted earnings per share as calculated
in accordance with SFAS 128 does not differ from earnings per share amounts
reported in prior periods.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 introduces a new
model for segment reporting, called the "management approach." The management
approach is based on the way that management organizes segments within a company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure - any manner in which management disaggregates a company. The
management approach replaces the notion of industry and geographic segments in
current accounting standards. SFAS 131 is effective for fiscal years beginning
after December 15, 1997 and early adoption is encouraged. However, SFAS 131 need
not be applied to interim statements in the initial year of application. SFAS
131 requires restatement of all prior period information reported. The Company
intends to adopt this standard when required and is in the process of
determining the effect of SFAS 131 on the Company's consolidated financial
statements.
In March, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The statement is intended to eliminate the diversity in practice
in accounting for internal-use software costs and improve financial reporting.
The statement is effective for fiscal years beginning after December 15, 1998.
The Company is in the process of determining the effect of this statement on the
Company's consolidated financial position and results of operations.
Year 2000 Compliance
The Company is currently in the process of evaluating its information
technology infrastructure for the Year 2000 compliance. The Company does not
expect that the cost to modify its information technology infrastructure to be
Year 2000 compliant will be material to its financial position or results of
operations. The Company does not anticipate any material disruption in its
operations as a result of any failure by the Company to be in compliance. The
Company is in the process of obtaining information concerning the Year 2000
compliance status of its suppliers and customers. In the event that any of the
Company's significant suppliers or customers does not successfully and timely
achieve Year 2000 compliance, the Company's business or operations could be
adversely affected.
Inflation
Inflation has not had a material impact on the Company's results of
operations.
<PAGE>
BUSINESS
The Company was founded in June 1994 to create a national, full
service, same-day ground and air delivery and logistics company. In November
1995 the Company consummated a combination pursuant to which it acquired eleven
established businesses providing same-day ground and air delivery and logistics
services concurrently with the closing of its initial public offering (the
"Offering"). The Company provides an extensive network of same-day delivery
services to a wide range of commercial, industrial and retail customers. The
Company's ground delivery operations currently are concentrated on the East
Coast, with a strategic presence in the Midwest and on the West Coast. The
Company's air delivery services are provided throughout the United States and to
major cities around the world.
The Company's same-day delivery services are generally divided between
rush and scheduled delivery. Rush delivery typically consists of delivering
time-sensitive packages, such as critical machine parts or emergency medical
devices. Scheduled delivery services, provided on a recurring and often daily
basis, include deliveries from pharmaceutical suppliers to pharmacies, from
manufacturers to retailers, and the interbranch distribution of financial
documents.
The Company offers its customers a single source for their same-day
delivery needs. The Company's strategy is to achieve increased operating
efficiencies by consolidating operations, increasing the density of its delivery
routes and improving the productivity of existing personnel, equipment and
facilities. During 1997, the Company curtailed its acquisition activities to
focus on internal growth, strengthen its management structure and to improve
financial and operational systems. In connection therewith, and in accordance
with the Company's previously announced plans, the Company disposed of its
contract logistics subsidiary and its fulfillment and direct mail operation. In
1998, the Company intends to seek suitable acquisition candidates where the
Company can improve its existing market position or can establish a stronger
market presence.
In connection with the disposal of the Company's fulfillment and direct
mail business, the revenue, cost and expenses, assets and liabilities and cash
flows have been reclassified as discontinued operations in the accompanying
consolidated financial statements.
Industry Overview
The ground and air delivery industry in the United States is composed
largely of companies providing same-day, next-day and two-day services. The
Company primarily services the same-day delivery market. In contrast, the
next-day and two-day delivery markets are dominated by large nationally
established entities, such as United Parcel Service, Inc. ("UPS") and FedEx
Corp. ("FedEx").
The Company believes that the same-day ground and air delivery
industry, which is currently serviced by a fragmented system of approximately
10,000 companies, is undergoing substantial growth and consolidation. The
Company believes that several factors, including the following, are driving the
growth and consolidation of the industry:
Outsourcing and Vendor Consolidation. Commercial and industrial
concerns, which are major consumers of same-day delivery services, have
continued to follow the trend of concentrating on their core business by
outsourcing non-core activities. Businesses also are increasingly seeking
single-source solutions for their regional same-day delivery needs rather than
utilizing a number of smaller local delivery companies. At the same time, larger
national and international companies are looking toward decentralized
distribution systems. The recent strike by UPS has led many businesses to
reconsider their choice of single-source international delivery companies and
such businesses are adding flexibility by including regional delivery vendors.
As a result, the Company believes that significant opportunities exist for
regional carriers that are able to provide a full range of services to such
businesses.
Heightened Customer Expectations. Increased customer demand for
customized billing, enhanced tracking, storage, inventory management and
just-in-time delivery capabilities favor companies with greater resources to
devote to providing such services.
New Market Opportunities. The significant growth in catalog and at-home
shopping and in-home medical care present substantial growth opportunities for
companies capable of economically providing more customized, reliable services.
Services
The Company provides a full range of same-day ground and air delivery
service options.
Ground Delivery
The Company offers comprehensive same-day ground delivery products
including:
Rush. In providing rush or service on-demand, Company foot messengers
and drivers respond to customer requests for immediate pick-up and delivery of
time-sensitive packages. The Company generally offers one-, two-and four-hour
service, seven days a week, twenty-four hours a day. Typical customers include
commercial and industrial companies, hospitals and service providers such as
accountants, lawyers, advertising and travel agencies and public relations
firms.
Scheduled. The Company's scheduled delivery services are provided on a
recurring and often daily basis. The Company typically picks up or receives
large shipments of products, which are then sorted, routed and delivered. These
deliveries are made in accordance with a customer's specific schedule which
generally provides for deliveries to be made at particular times. Typical routes
may include deliveries from pharmaceutical suppliers to pharmacies, from
manufactures to retailers, the interbranch distribution of financial documents,
payroll data and other documents, and the delivery of other time-sensitive
materials for banks, financial institutions and insurance companies. The Company
also provides these services to large retailers for home-delivery, including
large cosmetic companies, door-to-door retailers, catalog marketers, home health
care distributors and other direct sales companies.
Facilities Management. The Company provides mailroom management
services, including the provision and supervision of mailroom personnel, mail
and package sorting, internal delivery and outside local messenger services.
Typical customers include commercial enterprises and professional firms.
Air Services
The Company provides next-flight-out (rush) and scheduled air courier
and airfreight services to its customers, both domestically and internationally.
The services provided include arranging for (i) the transportation of a shipment
from the customer's location to the airport, (ii) air transportation, and (iii)
the delivery of the shipment to its ultimate destination. In order to meet the
needs of its customers, the Company has established relationships with many
major airlines and large airfreight companies from which the Company purchases
cargo space on an as-needed basis.
Operations
Ground Delivery
The Company's delivery operations are currently managed on a regional
basis. The regions have operations centers staffed by dispatchers, as well as
order entry and other operations personnel. Coordination and deployment of
delivery personnel is accomplished either through communications systems linked
to the Company's computers, through pagers, by radio or telephone. A dispatcher
coordinates shipments for delivery within a specific time frame. Shipments are
routed according to the type and weight of the shipment, the geographic distance
between the origin and destination and the time allotted for the delivery. In
the case of scheduled deliveries, routes are designed to minimize the unit costs
of the deliveries and to enhance route density. The Company is currently
installing new hardware and software systems designed to enhance and centralize
the reporting and tracking of shipments through the ground system as well as to
simplify the process of designing and scheduling delivery routes.
Air Services
The Company's air courier and airfreight service begins with a customer
placing an order, which is then dispatched for pickup by a local driver. A
tracking number is assigned to the shipment and entered into the Company's
computer system. The computer system than selects the optimal route for the
shipment based on delivery, destination and timing considerations, tracks the
shipment as it flows through the delivery stream until it is ultimately
delivered to the recipient and prepares the appropriate billing charges. At the
final destination, a "proof of delivery" is obtained to conclude and confirm the
delivery. At any point in the process, the Company is able to inform the
customer as to the exact location of its shipment within the distribution
network.
Sales and Marketing
The Company believes that a direct sales force most effectively reaches
its customers for same-day delivery services and, accordingly, the Company does
not currently engage in mass media advertising. The Company markets directly to
individual customers by designing and offering customized service packages after
determining a customer's specific delivery and distribution requirements. The
Company is implementing a coordinated "major account" strategy by building on
established relationships with regional and national customers. The Company also
employs certain direct response marketing techniques.
Many of the services provided by the Company, such as facilities
management, distribution and scheduled services, are determined on the basis of
competitive bids. However, the Company believes that quality and service
capabilities are also important competitive factors. In certain instances, the
Company has obtained business by offering a superior level of service, even
though it was not the low bidder for a particular contract. The Company derives
a substantial portion of its revenues from customers with whom it has entered
into contracts. Virtually all scheduled dedicated vehicle and facilities
management services are provided pursuant to contracts. Most of these contracts
are terminable by the customer on relatively short notice without penalty.
Competition
The market for the Company's delivery service is highly competitive.
The Company believes that the principal competitive factors in the markets in
which it competes are reliability, quality, breadth of service and price. The
Company competes on all such factors. Most of the Company's competitors in the
same-day ground and air delivery market are privately held companies that
operate in only one location or in a limited service area. However, there is a
growing trend toward consolidation in the industry. Certain of the Company's
competitors have recently consolidated, such as Corporate Express, Inc., Dynamex
Inc. and Dispatch Management Services, Inc. In addition, UPS and FedEx have
begun to provide same-day air delivery services.
In addition to the same-day delivery services provided by the Company,
customers also utilize next-day and second-day services. The market for next-day
and second-day services is dominated by nationwide network providers, such as
FedEx and UPS, which have built large, capital-intensive distribution channels
that allow them to process a high volume of materials. In order to effectively
operate their networks, these companies typically have fixed deadlines for
next-day or second-day delivery services. In contrast, the Company specializes
in on-demand, next-flight-out deliveries or services which, by their nature, are
not governed by rigid time schedules. If a customer is unable to meet a network
provider's established deadline, the Company can pick up the shipment, put it on
the next available flight and deliver it, in some cases, before the network
provider's scheduled delivery time. The Company's services are available
twenty-four hours a day, seven days a week.
The Company obtains space on scheduled airline flights to provide its
air services and accordingly does not have to acquire or maintain an expensive
fleet of airplanes. As a result, the Company can provide a more flexible,
specialized service to its customers without incurring the high fixed overhead
that the larger network providers must incur.
Acquisitions and Divestitures
In November 1995 the Company commenced operations simultaneously with
the acquisition of eleven companies providing same-day delivery and logistics
services. The aggregate consideration paid by the Company was approximately
$29.6 million in cash and 2,935,702 shares of Common Stock, par value $.001 per
share (the "Common Stock"), for an aggregate value of approximately $67.8
million.
In 1996, the Company acquired several additional businesses aggregating
approximately $15.6 million in annual revenues. The aggregate purchase price
paid by the Company for these businesses was approximately $3.3 million,
consisting of a combination of cash, seller financed debt and shares of Common
Stock. The purchase price was subsequently reduced by approximately $357,000 due
to actual revenue not reaching projected revenue as stipulated in the purchase
agreements. Each of the transactions has been accounted for as a purchase.
In 1997, the Company curtailed its acquisition activity and focused on
internal growth. Consistent with the change in strategic focus, in January 1997,
the Company sold its contract logistics subsidiary to David Mathia, the founder
and president of such subsidiary, in exchange for 137,239 shares of the
Company's common stock. In connection with the sale, the Company recorded a gain
of approximately $816,000 before the effect of Federal and state income taxes.
During October 1997, the Company announced its intention to exit the fulfillment
and direct mail business and in December 1997 sold its fulfillment and direct
mail business for $850,000 in cash and notes. In connection with the sale, the
Company recorded a gain of approximately $23,000 net of Federal and state income
taxes of approximately $15,000. Accordingly, these operations have been
reclassified as discontinued operations in the accompanying consolidated
financial statements.
On July 2, 1998, the Company acquired all assets and certain
liabilities of Metro Courier Network, Inc. ("Metro") for $4.25 million plus
contingent payments, with $2.5 million in cash and a $1.75 million convertible
note. The contingent payments are in the aggregate amount of up to $1.5 million
and are payable based on the achievement of certain financial goals by the newly
formed division during the two year period following the closing. The Company
intends to pursue additional acquisitions in 1998, where the Company can improve
its existing market position or establish a strategic market presence. The
Company's ability to make additional acquisitions is limited under the terms of
its Revolving Credit Facility.
Regulation
The Company's delivery operations are subject to various state and
local regulations and, in many instances, require permits and licenses from
state authorities. To a limited degree, state and local authorities have the
power to regulate the delivery of certain types of shipments and operations
within certain geographic areas. Interstate and intrastate motor carrier
operations are also subject to safety requirements prescribed by the United
States Department of Transportation (the "DOT") and by State Departments of
Transportation. The Company's failure to comply with the applicable regulations
could result in substantial fines or possible revocation of one or more of the
Company's operating permits.
Safety
The Company seeks to ensure that all employee drivers meet safety
standards established by the Company and its insurance carriers as well as the
DOT. In addition, where required by the DOT or state or local authorities, the
Company requires independent owner/operators utilized by the Company to meet
certain specified safety standards. The Company reviews prospective drivers in
an effort to ensure that they meet applicable requirements.
Intellectual Property
The Company filed an application to register the service mark
"Consolidated Delivery & Logistics, Inc. The Total Package in Delivery" which is
currently pending in the U.S. Patent and Trademark Office. No assurance can be
given that any such registration will be granted or that if granted, such
registration will be effective to prevent others from (i) using this or similar
service mark concurrently or (ii) preventing the Company from using the service
mark in certain locations. The Company is not aware of any other entity using
the name "Consolidated Delivery & Logistics, Inc." or the service mark "The
Total Package in Delivery."
Employees and Independent Contractors
At December 31, 1997, the Company employed approximately 2,900 people,
2,000 as drivers or messengers, 400 in operations, 300 in clerical and
administrative positions, 50 in sales and 150 in management. The Company is not
a party to any collective bargaining agreements, although the Company is subject
to union organizing activity from time to time. The Company has not experienced
any work stoppages and believes that its relationship with its employees is
good.
The Company also had contracts with approximately 1,000 independent
contractors as of December 31, 1997. From time to time, federal and state
authorities have sought to assert that independent contractors in the
transportation industry, including those utilized by the Company, are employees,
rather than independent contractors. In 1997, a subsidiary of the Company
satisfactorily concluded an employment status examination. The Company has been
informed that two additional examinations will be conducted in 1998 regarding
employment status at certain other Company subsidiaries. The Company continues
to believe that the independent contractors utilized by the Company are not
employees under existing interpretations of federal and state laws. However,
there can be no assurance that federal and state authorities will not challenge
this position, or that other laws or regulations, including tax laws, or
interpretations thereof, will not change. If, as a result of any of the
foregoing, the Company were required to pay for and administer added benefits to
independent contractors, the Company's operating costs would substantially
increase. See "Risk Factors - Independent Contractors and Employee
Owner/Operators."
<PAGE>
Property
As of December 31, 1997, the Company operated from 53 leased facilities
(excluding eight authorized sales agent locations). These facilities are
principally used for operations, general and administrative functions and
training. In addition, several facilities also contain storage and warehouse
space. The table below summarizes the location of the Company's current
facilities (excluding the sales agent locations).
State Number of Facilities
- ----- --------------------
New York.......................................... 16
Florida........................................... 9
New Jersey........................................ 6
California........................................ 3
Massachusetts..................................... 3
Illinois.......................................... 2
Louisiana......................................... 2
Ohio.............................................. 2
Connecticut....................................... 1
Georgia........................................... 1
Indiana........................................... 1
Maine............................................. 1
Maryland.......................................... 1
Missouri.......................................... 1
North Carolina.................................... 1
Tennessee......................................... 1
Virginia.......................................... 1
Washington........................................ 1
The Company's corporate headquarters are located in Clifton, New
Jersey. The Company believes that its properties are generally well maintained,
in good condition and adequate for its present needs. Furthermore, the Company
believes that suitable additional or replacement space will be available when
required.
As of December 31, 1997, the Company owned or leased approximately 270
cars and 480 trucks of various types, which are primarily operated by drivers
employed by the Company. In addition, certain of the Company's employee drivers
own or lease their own vehicles. The Company also hires independent contractors
who typically provide their own vehicles and are required to carry at least the
minimum amount of insurance required by state law.
The Company's aggregate rental expense for the year ended December
31, 1997 was approximately $3.5 million. See Note 12 to the Company's
Consolidated Financial Statements.
Litigation
On March 19, 1997, a purported class action complaint, captioned
Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al. (97 Civ. 1939),
was filed in the United States District Court for the Southern District of New
York (the "Court") against the Company, certain of the Company's present and
former executive officers, and the co-managing underwriters of the Company's
initial public offering (the "Offering"). The gravamen of the complaint is that
the Company's registration statement for the Offering contained misstatements
and omissions of material fact in violation of the federal securities laws and
that the Company's financial statements included in the registration statement
were false and misleading and did not fairly reflect the Company's true
financial condition. The complaint seeks the certification of a class consisting
of purchasers of the Company's Common Stock from November 21, 1995 through
February 27, 1997, rescission of the Offering, attorneys' fees and other
damages. In April 1997, five other complaints containing allegations identical
to the Gapszewicz complaint were filed in the same federal court against the
Company. On May 27, 1997, these six complaints were consolidated into a single
action entitled "In re Consolidated Delivery & Logistics, Inc. Securities
Litigation". On July 16, 1997, the Company and the underwriter defendants filed
a motion to dismiss the complaint. In response, the plaintiffs filed an amended
complaint on October 20, 1997. A motion to dismiss the amended complaint was
filed by the Company and the underwriter defendants on December 15, 1997. No
ruling on the Company's motion has been rendered by the Court. The Company
believes the allegations contained in the amended complaint are without merit
and intends to continue to vigorously defend the action.
In February 1996, Liberty Mutual Insurance Company ("Liberty Mutual")
filed an action against Securities Courier Corporation, a subsidiary of the
Company, Mr. Vincent Brana and certain other parties in the United States
District Court for the Southern District of New York alleging, among other
things, that Securities Courier had fraudulently obtained automobile liability
insurance from Liberty Mutual in the late 1980s and early 1990s at below market
rates. This suit, which claims common law fraud, fraudulent inducement, unjust
enrichment and violations of the civil provisions of the Federal RICO statute,
among other things, seeks an unspecified amount of compensatory and punitive
damages from the defendants, as well as attorneys' fees and other expenses.
Under the terms of its acquisition of Securities Courier, the Company has
certain rights to indemnification from Mr. Brana. Discovery is currently pending
and as a result the Company is unable to make a determination as to the merits
of the claim. The Company does not believe that an adverse determination in this
matter would result in a material adverse effect on the consolidated financial
position or results of operations of the Company.
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
and property damage incurred in connection with its same-day ground and air
delivery operations. Management believes that none of these actions, including
the actions described above, will have a material adverse effect on the
consolidated financial position or results of operations of the Company.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning each of
the directors and executive officers of the Company:
Name Age Position
Albert W. Van Ness, Jr. 55 Chairman of the Board, Chief Executive
Officer, Chief Financial Officer
and Director
William T. Brannan 50 President, Chief Operating Officer
and Director
Joseph J. Leonhard 47 Vice President - Controller
Mark Carlesimo 45 General Counsel
Michael Brooks 43 Southeast Region Manager
Randy Catlin 51 Air Division Manager
Robert Wyatt 39 Northeast Region Manager
William T. Beaury 44 Director
Jon F. Hanson 61 Director
Labe Leibowitz 44 Director
Marilu Marshall 52 Director
Kenneth W. Tunnell 68 Director
John S. Wehrle 45 Director
Albert W. Van Ness, Jr. has served as the Chairman of the Board, Chief Executive
Officer and Director of the Company since February 1997 and as Chief Financial
Officer since June 1998. He remains a Managing Partner of Club Quarters, LLC, a
hotel development and management company, since October 1992. From June 1990
until October 1992, Mr. Van Ness served as Director of Managing People
Productivity, a consulting firm. Prior thereto, from 1982 until June 1990, Mr.
Van Ness held various executive offices with Cunard Line Limited, a passenger
ship and luxury hotel company, including Executive Vice President and Chief
Operating Officer of the Cunard Leisure Division and Managing Director and
President of the Hotels and Resorts Division. Prior thereto, Mr. Van Ness served
as the President of Seatrain Intermodal Services, Inc., a cargo shipping
company.
William T. Brannan has served as the President and Chief Operating Officer of
the Company since November 1994. From January 1991 until October 1994, Mr.
Brannan served as President, Americas Region - US Operations, for TNT Express
Worldwide, a major European-based overnight express delivery company. Mr.
Brannan has 23 years of experience in the transportation and logistics industry.
Joseph J. Leonhard has been the Controller of the Company since June 1995 and
was appointed to the position of Vice-President in May 1996. Prior thereto, from
June 1987 until June 1995, Mr. Leonhard was the Controller and Chief Financial
Officer of Scientific Devices East, Inc.
Mark Carlesimo has been General Counsel of the Company since September 1997.
From July 1983 until September 1997, Mr. Carlesimo served as Vice President of
Legal Affairs of Cunard Line Limited.
Michael Brooks has served as Director of the Company since December 1995, as
Southeast Region Manager since August 1996 and as President of Silver Star
Express, Inc., a subsidiary of the Company, since November 1995. Prior to the
merger of Silver Star Express, Inc. into the Company, Mr. Brooks was President
of Siver Star Express, Inc. since 1988. Mr. Brooks has 24 years of experience in
the same-day ground and distribution industries. In addition, Mr. Brooks is
currently a Director of the Express Carriers Association, an associate member of
the National Small Shipment Traffic Conference and an affiliate of the American
Transportation Association.
Randy Catlin has served as Air Division Manager of the Company and as Chief
Executive Officer of SureWay Worldwide, a subsidiary of the Company, since March
1997. From 1984 until 1997, Mr. Catlin was Vice-Chairman of SureWay Worldwide,
formerly known as Sureway Air Traffic Corporation. Mr. Catlin has 31 years of
experience in the air courier industry. In addition, Mr. Catlin is currently
Chairman of the annual conference of the Air Courier Conference of America, and
has served previously as President and Director of the organization.
Robert Wyatt has been the Northeast Region Manager since November 1997,
Manhattan Region Manager since August 1996 and President of Olympic Courier
Systems, Inc. a subsidary of the Company since November 1995. From December 1995
until November 1997, Mr. Wyatt served as Director of the Company. Prior thereto,
Mr. Wyatt was co-founder and President of certain of the companies comprising
Orbit/Lightspeed Courier Systems, Inc. ("Orbit/Lightspeed"), a former subsidiary
of the Company which has been merged into Olympic. Mr. Wyatt has 14 years of
experience in the same-day delivery industry. He currently serves on the Board
of Directors of the Messenger Courier Association of the Americas. Mr. Wyatt has
also served as the President of the New York State Messenger and Courier
Association.
William T. Beaury, 44, Director since 1995. Vice-Chairman of the Company since
December 1995. Prior thereto, Mr. Beaury was a co-founder, the Chairman and a
director of SureWay Air Traffic Corporation ("SureWay") and SureWay Logistics
Inc., subsidiaries of the Company, since 1984 and October 1993, respectively. In
addition, since 1975, Mr. Beaury has served as President of Assets Management
Limited, an investment management company which previously owned 74% of SureWay.
Mr. Beaury has 20 years of experience in the same-day ground and air delivery
industry. Mr. Beaury also has been a member of the Air Courier Conference of
America ("ACCA") since 1980, The Advertising Production Club since 1988, and a
member of the Presidents Association-the CEO Division of the American Management
Association.
Jon F. Hanson, 61, Director since 1997. Mr. Hanson has served as the President
and Chairman of Hampshire Management Company, a real estate investment firm
since December 1976. From April 1991 to the present, Mr. Hanson has served as a
director to the Prudential Insurance Company of America. In addition, Mr. Hanson
currently serves as a director with the United Water Resources and the Orange
and Rockland Utilities from April 1985 and September 1995, respectively.
Labe Leibowitz,44, Director since 1995. President of Clayton/National Courier
Systems, Inc. ("National"), a subsidiary of the Company, from July 1995 to
August 1997. Since September 1997, he has acted as a consultant to National.
Leibowitz served as Executive Vice President of National from 1980 until July
1995. Mr. Leibowitz has 15 years of experience in the same-day delivery
industry. Mr. Leibowitz currently serves on the Board of Directors of the
Association of Messenger Courier Services and is a member of the Messenger
Courier Association of the Americas.
Marilu Marshall, 52. Director since 1997. Senior Vice-President and General
Counsel, Cunard Line Limited since November 1987. Prior thereto, from July 1984
to September 1987 Ms. Marshall served as the Vice-President and General Counsel
of GNOC, Corp., t/a Golden Nugget Hotel & Casino.
Kenneth W. Tunnell, 68, Director since 1995. Managing Partner of Tanglewood
Associates, a management consulting firm, since January 1995. Prior thereto,
until December 1994, Mr. Tunnell was the Chairman of K.W. Tunnell Company, Inc.,
a management consulting firm founded by Mr. Tunnell in 1962. In addition, from
August 1993 to August 1996, Mr. Tunnell served as a director of ASECO
Corporation.
John S. Wehrle, 45, Director since 1997. President and CEO of Heartland
Capital Partners,L.P., since August 1997. Prior thereto, Mr. Wehrle served as
Vice President and Head of Mergers & Acquisitions for A.G. Edwards & Sons, Inc.
from July 1994 to July 1997. From 1989 to 1994 Mr. Wehrle served as Vice
President-Financial Planning for The Dyson-Kissner-Moran Corporation where he
was a key participant in acquisitions and corporate development. He also served
as Managing Director of Chase Manhattan Bank, N.A. for three years from August
1986 to October 1989 where he was engaged in the execution of Leveraged
Acquisitions. From 1976 to 1986 Mr. Wehrle held various positions with both
Price Waterhouse and Touche Ross & Co. in both New York and London.
Compensation of Directors
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Effective in 1997, each director who is
not an employee of the Company received an annual retainer of $16,000 ($18,500
for any committee chairperson). The total directors fees paid to non-employee
directors in 1997 was $48,555. On September 1, 1997 Mr. Labe Leibowitz's
employment with a subsidiary of the Company was terminated and at that time the
Company entered into a three year Consulting Agreement with Mr. Leibowitz
pursuant to which Mr. Leibowitz is paid fixed fees of $4,166.66 per month.
Directors of the Company are reimbursed for out-of-pocket expenses incurred in
their capacity as directors of the Company.
The Company amended the 1995 Stock Option Plan for Independent
Directors (the "Director Plan"), under which each non-employee director will
automatically receive options covering 1,250 shares of Common Stock on the first
day of each fiscal quarter. The Company has reserved 100,000 shares of Common
Stock for issuance in connection with the Director Plan. Options granted under
the Director Plan have an exercise price per share equal to fair market value of
the underlying shares on the date of grant. Upon exercise of an option under the
Director Plan, the participating director will be required to provide the
exercise price in full, in cash or in shares of the Company's securities valued
at fair market value on the date of the exercise of the option. No option will
be exercisable within one year of the date of grant and no option will be
exercisable more than ten years from the date of grant.
Options outstanding under the Plan in favor of these individuals as of
April 1, 1998 are as follows: Kenneth W. Tunnell-1,250, 1,250 and 1,250 options
at $2.81, $2.69 and $4.38 per share; Marilu Marshall-1,250, 1,250 and 1,250
options at $2.81, $2.69 and $4.38 per share; Jon Hanson-1,250, 1,250 and 1,250
options at $2.81, $2.69 and 4.38 per share; Labe Leibowitz-1,250, 1,250 and
1,250 options at $2.81, $2.69 and $4.38 per share and John Wehrle-1,250 and
1,250 options at $2.69 and $4.38 per share.
<PAGE>
Executive Compensation
The Company was incorporated in June 1994 and did not conduct any
operations prior to November 1995. The following tables summarize certain
information relating to the compensation paid or accrued by the Company for
services rendered during the years ended December 31, 1995, 1996 and 1997 to
each person serving as the Chief Executive Officer of the Company and each of
the Company's four other most highly paid executive officers whose compensation
exceeded $100,000.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation (1) Awards (2)
------------------------------------------------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Other Securities
Annual Underlying All Other
Name and Salary Bonus Compensation Options/SARs Compensation
Principal Position Year ($) ($) ($)(7) ($)(3) ($)
- ---------------------------- -------- -------------- -------- ----------------- ----------------- ---------------
*Exercisable
**Unexercisable
Albert W. Van Ness, Jr. 1997 - - - *310,585 2,500(11)
Chairman and Chief 1996 - - - ** - 16,400(11)
Executive Officer (4) 1995 - - - -
John Mattei 1997 9,615 - - *7,692 -
Chairman and Chief 1996 200,000 - - **
Executive Officer (5) 1995 69,692(6) - -
William T. Brannan 1997 200,000 15,005 - *34,584 -
President and Chief 1996 200,000 - - **36,582
Operating Officer 1995 81,231(6) -
Joseph G. Wojak 1997 200,000 - - *24,584 -
Executive Vice 1996 200,000 - - **24,582
President and Chief 1995 81,231(6) -
Financial Officer (12)
William T. Beaury 1997 192,350 - - *9,092 -
Director and Member 1996 200,000 - - **7,692
of Executive Committee 1995 210,320(8) - -
Michael Brooks 1997 174,200 39,480 - *6,731 -
Southeast Region 1996 175,000 - - **16,730
Manager 1995 153,750(9) - -
Randy Catlin 1997 188,455 - - *13,392 -
Air Division Manager 1996 200,020 - - **12,692
1995 146,020(10) - -
</TABLE>
- -------------------
(1) The Company did not commence operations until November 1995.
(2) The Company did not grant any stock appreciation rights, restricted stock
awards or make any long-term incentive plan payout during the years ended
December 31, 1995, 1996 and 1997.
(3) Comprised solely of incentive or non-qualified stock options. See
"Stock Option Plans - Employee Stock Compensation Program."
(4) Commencing February 1997 Mr. Van Ness served as Chairman of the Board and
Chief Executive Officer and commencing June 1998 he served as Chief
Financial Officer on an interim basis.
(5) Mr. Mattei resigned as Chairman of the Board and Chief Executive
Officer of the Company in January 1997.
(6) Excludes consulting fees paid by C.T.A. Group, LLC and success fees paid by
the Company to each of Messrs. Mattei, Brannan and Wojak in connection with
the formation of the Company and the acquisition of the Company's various
subsidiaries (the "Combination").
(7) Excludes certain personal benefits, the total value of which was less than
the lesser of either $50,000 or 10% of the total annual salary and bonus
for each of the executives.
(8) Includes amounts paid to Mr. Beaury by Sureway Air prior to the
Combination.
(9) Includes amounts paid to Mr. Brooks by Silver Star Express, Inc. prior to
the Combination.
(10) Includes amounts paid to Mr. Catlin by Sureway Air prior to the
Combination.
(11) Represents amounts paid to Mr. Van Ness as Director's fees by the Company.
(12) Mr. Wojak resigned as Exective Vice President and Chief Financial Officer
in May 1998.
<PAGE>
Employment Agreements; Covenants-Not-To-Compete
At the time of his appointment as Chairman of the Board and Chief
Executive Officer, Mr. Van Ness entered into a one-year employment agreement
with the Company effective February 5, 1997. In lieu of a salary, Mr. Van Ness
was given two stock option grants to purchase 100,000 shares of Common Stock of
the Company. Options to purchase 50,000 shares were granted at $4.875 per share
and options to purchase another 50,000 shares were granted at $7.875 per share.
All options vested immediately. At the recommendation of the Compensation
Committee of the Board of Directors, Mr. Van Ness' 1997 employment agreement was
amended later in 1997 granting Mr. Van Ness immediately vested options to
purchase 208,085 additional shares of Common Stock. The Committee approved
options to purchase 50,000 shares at $3.50, 50,000 shares at $6 and 108,085
shares at $2.313. All of Mr. Van Ness' options terminate in the year 2007. Mr.
Van Ness' agreement is subject to certain non-competition, non-solicitation and
anti-raiding provisions.
In connection with the Company's initial public offering and
simultaneous acquisition of 11 separate businesses (the "Combination") in
November of 1995, Messrs. Brannan, Beaury, Wojak, Catlin, Wyatt and Brooks each
entered into an employment agreement with the Company which commenced on
November 27, 1995 for a term of five years. Pursuant to such agreements, Messrs.
Brannan, Beaury and Wojak receive an annual base salary of $200,000 for the term
of the employment agreement, subject to periodic increases at the discretion of
the Board of Directors. Messrs. Brooks, Catlin and Wyatt receive an annual base
salary of $165,000, $185,000 and $154,000 respectively, subject to periodic
increases at the discretion of the Board of Directors. Messrs. Brannan and Wojak
also received in 1996 options to purchase 33,782 shares at an exercise price of
$4 7/8 per share which vest over the terms of their contracts. Each of the
executives will be entitled to participate in all compensation and employee
benefit plans, including such bonuses as may be authorized by the Board of
Directors from time to time.
In connection with the Combination, officers of the Company and certain
senior officers/shareholders of the acquired companies ("Subsidiaries")
(including Messrs. Brannan, Beaury, Wojak, Catlin, Wyatt and Brooks) also
entered into employment agreements which commenced on November 27, 1995 for a
five year term. Pursuant to such agreements, each person receives an annual base
salary ranging from $90,000 to $200,000 per year, subject to periodic increases
at the discretion of the Board of Directors. Except as otherwise specified in
each person's employment agreement, each of such persons is entitled to
participate in all compensation and employee benefit plans, and to receive such
bonuses as may be authorized by the Board of Directors from time to time. Under
the terms of the employment agreements, each of such persons received options in
1995 to purchase a number of shares of Common Stock equal to such person's base
salary pursuant to his employment agreement (or based upon such base salary)
with the Company divided by the initial public offering (the "Offering") price
per share of the Common Stock in the Offering ($13 per share).
Each of the employment agreements provides that, in the event of a
termination of employment by the Company without cause, or a termination of
employment by the employee as a result of a constructive discharge, such
employee will be entitled to receive from the Company a lump-sum payment equal
to the employee's then-current base salary for the lesser of (i) the remaining
term of the agreement or (ii) three years (subject to certain limitations). In
the event of a change in control of the Company, if the employee has not
received sufficient prior notice that such employee's employment will be
continued following the change in control, such change in control will be deemed
to be a termination without cause with the effects specified above. In the event
of any change in control, the employee may also elect to treat the change in
control as a termination without cause by giving appropriate notice to the
Company. Each employment agreement also contains certain non-competition
covenants which will continue for a period of two years following termination of
employment. In addition, each employment agreement contains certain
anti-solicitation and anti-raiding provisions. However, in the event of a
termination without cause as described above, such covenants and provisions will
not be applicable.
STOCK OPTION PLANS
Employee Stock Compensation Program
In September 1995, the Board of Directors adopted, and the stockholders
of the Company approved, the Employee Stock Compensation Program in order to
attract and retain qualified directors, officers and employees of the Company,
to facilitate performance-based compensation for key employees and to provide
incentives for the participants in the Employee Stock Compensation Program to
enhance the value of the Common Stock. The Employee Stock Compensation Program
is administered by the Compensation Committee and authorizes the granting of
incentive stock options, non-qualified supplementary options, stock appreciation
rights, performance shares and stock bonus awards to key employees of the
Company (approximately 150 in total) including those employees serving as
officers or directors of the Company. The Company has reserved 1,900,000 shares
of Common Stock for issuance in connection with the Employee Stock Compensation
Program. Options granted under the Employee Stock Compensation Program have an
exercise price equal to the fair market value of the underlying Common Stock at
the date of grant and vest over a four-year period unless otherwise agreed by
the Compensation Committee of the Board of Directors at the time of grant.
<PAGE>
The following table summarizes certain information as of April 1, 1988
relating to the grant of stock options to purchase Common Stock to each of the
executives named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
Individual Grants
-------------------------------------------------------------------------------------
Percent of
Number of Total Grant
Securities Options /SARs Date
Underlying Granted to Exercise or Present
Options/SARs Employees in Base Price Expiration Value
Name Granted (#) (2) Fiscal Year (3) ($/sh) Date $(5)
------------------------- ---------------- ------------------ ------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Albert W. Van Ness, Jr. 50,000 (2) 11% 4.88 January 5, 2007 $130,235
Albert W. Van Ness, Jr. 50,000 (2) 11% 7.88 January 5, 2007 $98,915
Albert W. Van Ness, Jr. 50,000 (2) 11% 3.50 November 11, 2007 $64,600
Albert W. Van Ness, Jr. 50,000 (2) 11% 6.00 November 11, 2007 $45,030
Albert W. Van Ness, Jr. 108,085 (2) 25% 2.31 December 11, 2007 $133,528
William T. Brannan 10,000 (2) 2% 2.56 December 2, 2007 $13,690
William T. Brannan 12,000 (4) 3% 2.31 December 12, 2007 $17,625
William T. Beaury 1,400 (2) -% 3.50 December 2, 2007 $1,617
Michael Brooks 10,000 (4) 2% 2.31 December 12, 2007 $14,688
Randy Catlin 5,700 (2) 1% 3.50 December 2, 2007 $6,585
Randy Catlin 5,000 (4) 1% 2.31 December 12, 2007 $7,344
</TABLE>
- ------------------------
(1) The Company did not grant any stock appreciation rights in 1997.
(2) Options vest upon date of grant.
(3) Options covering a total of 439,328 shares of Common Stock were
granted under the Employee Stock Compensation Program in 1997.
(4) These options are exercisable over a four year period. 25% of these options
become exercisable one year from the date of grant, an additional 25%
become exercisable two years from the date of grant, an additional 25%
become exercisable three years from the date of grant, and an additional
25% become exercisable four years from the date of grant.
(5) The present value of the options granted was determined using the
Black-Scholes pricing model and based on the following assumptions: the
risk free interest was 5.6%, the expected term of the option was 5 years,
the volatility factor was 55% and the dividend yield was 0.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
Number of Securities Value of
Underlying Unexercised Unexercised
In-The-Money
Shares Options/SARs Options/SARs
Acquired Value at FY-End (#) at FY-End ($)(3)
----------------------- -----------------------
On Exercise Realized Exercisable/ Exercisable/
Name (#) (2) ($) (2) Unexercisable Unexercisable
- -------------------------- ---------------- ---------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Albert W. Van Ness, Jr. -- -- 310,585 / - $20,536 / -
William T. Brannan -- -- 34,584 / 36,582 - / $2,280
William T. Beaury -- -- 9,092 / 7,692 - / -
Joseph G. Wojak -- -- 24,584 / 24,582 - / -
Michael Brooks -- -- 6,731 / 16,730 - / $1,900
Randy Catlin -- -- 13,392 / 12,692 - / $950
</TABLE>
- -------------------------
(1) No stock appreciation rights have been granted by the Company.
(2) No options were exercised in 1997.
(3) As of December 31, 1997, the fair market value of a share of Common Stock
(presumed to equal the closing sale price as reported on the Nasdaq
National Market) was $2.50.
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee is currently comprised of Ms.
Marilu Marshall, Chairman, Mr. Tunnell and Mr. Jon Hanson. None of such persons
is or has been an officer or employee of the Company. At present, no executive
officer of the Company and no member of its Compensation Committee is a director
or compensation committee member of any other business entity which has an
executive officer that sits on the Company's Board of Directors or Compensation
Committee.
CERTAIN TRANSACTIONS
Organization of the Company
In connection with its formation and initial capitalization, the
Company issued 2,000,000 shares of Common Stock at an aggregate purchase price
of $2,000 to certain founding stockholders including Mr. Wojak. Subsequently, in
November 1994, Mr. Brannan acquired 100,000 shares of Common Stock for $100.
In November 1995, the Company entered into an amended and restated
management agreement with Messrs. Wojak and Brannan and the former Chairman of
the Company (the "Management Agreement") pursuant to which such persons agreed
to provide certain consulting services to the Company prior to the consummation
of the Combination in exchange for which each of them received a fee of $3,000
per week. In addition, pursuant to the Management Agreement, the Company paid
each such person $21,000 upon consummation of the Combination, representing
amounts which were past due to such individuals in connection with services
rendered to the Company in its formation. In addition, upon consummation of the
Combination, the Company paid Messrs. Wojak and Brannan and the former Chairman
$135,000, $50,000 and $165,000, respectively, as a success fee. Under the
Management Agreement, Messrs. Wojak, Brannan and the former Chairman agreed to
reduce their ownership of Common Stock to an aggregate of 394,423 shares of
Common Stock.
In connection with the Combination, certain officers, directors and
5% shareholders received cash and shares of Common Stock as follows: Mr. Beaury:
319,354 shares and $3,328,870; Mr. Brana: 357,301 shares and $3,739,680; Mr.
Brooks: 240,293 shares and $2,628,841; Mr. L. Leibowitz: 145,178 shares and
$976,936; Mr. T. LoPresti: 319,354 shares and $3,328,870; and Mr. Wyatt: 49,900
shares and $450,000.
Real Estate Transactions
Mr. Brooks and members of his immediate family own various real estate
partnerships which lease properties to Silver Star, a subsidiary of the Company,
for use as terminals in Miami, Florida; Altanta and Valdosta, Georgia and
Dayton, Ohio. Silver Star paid annual rental fees to such partnerships in each
of 1995, 1996 and 1997 of $126,000, $157,570 and $157,570, respectively. As of
January 1, 1998, the Company is obligated to pay rentals of $150,000 for these
properties, which the Company believes to be the fair market rental value of the
properties.
Certain Indebtedness
The Company repaid approximately $2.3 million of indebtedness of the
Founding Companies with $300,000 of the net proceeds of the Offering and $2.0
million received by Securities Courier in connection with the repayment of a
stockholder loan. Most of such indebtedness was personally guaranteed by the
shareholders of the Founding Companies. The non-interest bearing stockholder
loan from Securities Courier to its sole stockholder was $2.0 million at each of
December 31, 1993 and 1994.
Other Transactions
Mr. Labe Leibowitz has an interest in Lee B. Leasing, a limited
partnership which purchases automobiles and equipment and leases them to
National, a subsidiary of the Company. National paid, in the aggregate,
$179,000, $96,115 and $67,897 in leasing fees to the limited partnership in each
of 1995, 1996 and 1997, respectively. As of January 1, 1998, National has agreed
to lease vehicles from Lee B. Leasing, which, in the aggregate, will total
approximately $50,000 in annual lease payments. The Company believes these lease
payments to be no less favorable to the Company than could be obtained from
unaffiliated third parties.
Silver Star had non-interest bearing receivables from Michael
Brooks and his brother-in-law, Peter Silver, which aggregated $113,466 and
$167,434 at December 31, 1993 and 1994, respectively. Messrs. M. Brooks and P.
Silver repaid such receivables upon closing of the Offering. In addition, Silver
Star had a note receivable from B&B Properties, an entity owned by Michael
Brooks, Harry Brooks (the father of Michael Brooks) and an unrelated party, for
$100,000 at December 31, 1994. Such receivable accrued interest at a rate of 8%
per annum. Messrs. M. Brooks and H. Brooks repaid such receivable upon closing
of the Offering.
Mr. Brana has a 50% interest in Sparta Automobile and Truck Leasing
("Sparta"), a corporation which purchases vehicles and leases them to Securities
Courier. Securities Courier paid, in the aggregate, $225,000, $314,000 and
$401,000 in leasing fees to the corporation in each of 1995, 1996 and 1997,
respectively. As of January 1, 1998, Securities Courier had agreed to lease
vehicles from Sparta which, in the aggregate, will total $200,000 in annual
lease payments.
Under his employment agreement with the Company, Mr. Brana is entitled
to a refundable draw against his bonus of $58,000 per annum.
SureWay has a sales and consulting agreement with J.P.J. Express,
Inc., an entity one-third of which is owned by Mr. James LoPresti, the brother
of Mr. Thomas LoPresti. SureWay paid commissions to J.P.J. Express, Inc. of
approximately $712,000, $1,026,000 and $1,188,249 in 1995, 1996 and 1997,
respectively. Such agreement terminates January 1, 1999, subject to automatic
renewal for additional three-year periods.
Company Policy
In the future, transactions with officers, directors and affiliates of
the Company are anticipated to be minimal and will be approved by a majority of
the Board of Directors, including a majority of the disinterested members of the
Board of Directors, and will be made on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of April 1, 1998 with
respect to beneficial ownership of the Common Stock by (i) all persons known to
the Company to be the beneficial owner of 5% or more thereof, (ii) each
director, (iii) each Named Executive Officer and (iv) all executive officers and
directors as a group. Unless otherwise indicated, the address of each such
person is c/o Consolidated Delivery & Logistics, Inc., 380 Allwood Road,
Clifton, New Jersey 07012. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
Amount of Beneficial Ownership (1)
Shares Issuable Shares Issuable
Upon Conversion Upon Exercise
of Debentures of Stock
Options(1) Total Percentage Owned
Name Shares Shares
<S> <C> <C> <C> <C> <C>
Albert W. Van Ness, Jr. 25,000 9,090 310,585 344,675 4.9%
William T. Brannan 73,647 9,090 34,584 117,321 1.8
Joseph G. Wojak 147,377 9,090 24,584 181,051 2.7
William T. Beaury 638,708(2) 4,524 9,092 652,324(2) 9.8
Michael Brooks 236,693 9,090 8,731 254,514 3.8
Jon F. Hanson 10,000(3) 18,181 - 28,181 *
Labe Leibowitz 141,628 14,964 - 156,592 2.3
Marilu Marshall - - - - -
Kenneth W. Tunnell 7,500 4,545 2,500 14,545 *
John S. Wehrle - - - - -
Randy Catlin 110,617 9,090 13,392 133,099 2.0
Robert Wyatt 50,000(4) 3,030 5,128 58,158 *
All executive officers 1,441,370 92,956 414,558 1,948,884 27.2
and directors as a
group (14 persons)
Thomas LoPresti 638,708(2) 6,807 9,092 654,607 9.8
24-30 Skillman Avenue
Long Island City, NY
11101
Vincent Brana 357,301 - 5,770 363,071 5.4
80 Wesley Street
South Hackensack, NJ
07606
</TABLE>
- -----------------
* Less than 1%
(1) Includes options granted pursuant to the Employee Stock Compensation
Program and the Director Plan, which are exercisable within 60 days of
April 1, 1998. Options granted pursuant to the Employee Stock Compensation
Program and Director Plan in November 1995 and were granted at $13.00 per
share.
(2) Includes 638,708 shares of Common Stock held by a company which is
jointly owned by Mr. Beaury and Mr. LoPresti, each of whom may be deemed
to be the beneficial owner of all of such shares.
(3) Represents 10,000 shares held by Ledgewood Employees Retirement Plan of
which Jon F. Hanson is a beneficiary.
(4) Includes 1,000 shares held by Mr. Wyatt's wife.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $.001 per share, and 2,000,000 shares of preferred
stock, par value $.001 per share ("Preferred Stock"). As of June 30, 1998,
6,637,517 shares of Common Stock and no shares of Preferred Stock were
outstanding. As of that date there were approximately 158 record owners of the
Common Stock.
Common Stock
The holders of Common Stock are entitled to one vote for each share on
all matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then outstanding shares of Preferred
Stock, the holders of the Common Stock are entitled to such dividends as may be
declared at the discretion of the Board of Directors out of funds legally
available therefor. Holders of Common Stock are entitled to share ratably in the
net assets of the Company upon liquidation after payment or provision for all
liabilities and any preferential liquidation rights of any Preferred Stock then
outstanding. The holders of Common Stock have no pre-emptive rights to purchase
shares of stock of the Company. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued pursuant to this Registration Statement will, upon due
issuance thereof, be fully paid and nonassessable.
Preferred Stock
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Restated Certificate of Incorporation and limitations
prescribed by law, the Board of Directors is expressly authorized to adopt
resolutions to issue the shares, to fix the number of shares and to change the
number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of the Preferred Stock, in each case without any further
action or vote by the stockholders. The Company has no current plans to issue
any shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may discourage
bids for the Common Stock at a premium or may otherwise adversely affect the
market price of the Common Stock.
Statutory Business Combination Provisions
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans), or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 66-(2)/(3)% of the corporation's
outstanding voting stock at an annual or special meeting, excluding shares owned
by the interested stockholder. Under Section 203, an "interested stockholder" is
defined as any person who is (i) the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) an affiliate or associate of the
corporation and who was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action of
its stockholders to exempt itself from coverage. The Company has not adopted
such an amendment to its Restated Certificate of Incorporation or By-laws.
Limitation of Directors' Liabilities
Pursuant to the provisions of the Company's Restated Certificate of
Incorporation, directors of the Company are not personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty, except
for liability in connection with a breach of duty of loyalty, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for dividend payments or stock repurchases illegal under
Delaware law or any transaction in which a director has derived an improper
personal benefit.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
DESCRIPTION OF DEBENTURES
In September 1995, the Company issued $2.0 million in aggregate
principal amount of its 8% Subordinated Convertible Debentures due 2000 (the "8%
Debentures"). Pursuant to an offer effective as of April 1, 1998, certain of the
8% Debentures were converted to 10% Subordinated Convertible Debentures and an
additional $150,000 principal amount of Debentures were issued ("10% Debentures"
and, collectively with the 8% Debentures, the "Debentures"). The following is a
summary of certain provisions of the Debentures. This summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Debentures.
The Debentures will mature on August 21, 2000. Interest on the 8%
Debentures accrues at the rate of 8% per annum from the date of issuance and is
payable quarterly on each February 21, May 21, August 21 and November 21,
commencing February 21, 1996, to the persons who are registered holders of the
Debentures on the date of payment. Interest on the 10% Debentures accrues at the
rate of 10% per annum commencing April 1, 1998 and is payable on the same dates.
The Debentures are redeemable at the option of the Company, in whole or
in part, without premium or penalty at any time on or after August 18, 1998, at
their face amount plus accrued and unpaid interest, if any, to the date of
redemption. The Debentures are redeemable at the option of the holder, in whole
but not in part, without premium or penalty, at any time after August 21, 1998,
with respect to the 8% Debentures, or after August 21, 1999, with respect to the
10% Debentures.
The Debentures are convertible into shares of Common Stock at the
option of the holder at a conversion price equal to $11.05 per share with
respect to the 8% Debentures or $5.50 per share with respect to the 10%
Debentures, subject to adjustment in certain circumstances.
There are currently outstanding $1,260,000 aggregate principal
amount of 8% Debentures and $890,000 aggregate principal amount of 10%
Debentures.
SHARES ELIGIBLE FOR FUTURE SALE
As of June 30, 1998, the Company had outstanding 6,637,517 shares of
Common Stock. The 3,200,000 shares of Common Stock sold in the Offering and the
50,312 shares previously issued under the Registration Statement of which this
Prospectus is a part are generally freely tradeable without restriction unless
purchased by affiliates of the Company. None of the remaining 3,387,205
outstanding shares of Common Stock (collectively, the "Restricted Shares") have
been issued in transactions registered under the Securities Act, which means
that they may be resold publicly only in future transactions registered under
the Securities Act, or in compliance with an exemption from the registration
requirements of the Securities Act, including the exemption provided by Rule 144
thereunder.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of
Common Stock for at least one year, including an "affiliate" as that term is
defined under the Securities Act, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock on all exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not deemed to
have been an "affiliate" of the Company at any time during the 90 days preceding
a sale, and who has beneficially owned the shares proposed to be sold for at
least two years, would be entitled to sell such shares under Rule 144(k) without
regard to the limitations described above. Restricted securities sold by the
Company to, among others, its employees, officers and directors in reliance on
Rule 701 under the Securities Act may be resold in reliance on Rule 144 by such
persons who are not affiliates subject only to the provisions of Rule 144
regarding manner of sale, and by such persons who are affiliates without
complying with the Rule's holding period requirements. Rule 144A under the
Securities Act permits the immediate sale by the current holders of Restricted
Shares of all or a portion of their shares to certain qualified institutional
buyers as defined in Rule 144A, subject to certain conditions. Since all
Restricted Shares were issued by the Company more than two years prior to the
date of this Prospectus, they may be sold pursuant to Rule 144(k), unless they
are held by affiliates.
As of June 30, 1998, the Company had outstanding under the Stock Option
Plans options to purchase an aggregate of 1,022,192 shares of Common Stock,
722,824 of which were exercisable as of such date. Such shares will be eligible
for resale in the public market, unless held by affiliates of the Company. See
"Management Stock Option Plans."
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Lowenstein, Sandler PC, Roseland, New Jersey.
EXPERTS
The financial statements and schedule included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information contained in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, including the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document are not necessarily complete; with respect to
each such contract or document filed as an exhibit to the Registration
Statement, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. A copy of the Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, DC 20549 and at the
Commission's regional offices located at 500 West Madison Street, Suite 1400,
Chicago, IL 60661 and Seven World Trade Center, 13th Floor, New York, NY 10048.
Copies of such material may be obtained from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W. Washington, DC 20549, upon payment of the
fees prescribed by the Commission. The Commission also maintains an Internet
website that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission. The
address of that site is http://www.sec.gov.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants................................F-1
Consolidated Balance Sheets as of December 31, 1997 and 1996............F-2
Consolidated Statements of Operations For The Years Ended
December 31, 1997, 1996 and 1995.......................................F-3
Consolidated Statements of Changes in Stockholders' Equity
For The Years Ended December 31, 1997, 1996 and 1995...................F-4
Consolidated Statements of Cash Flows For The Years Ended
December 31, 1997, 1996 and 1995....................................F-5
Notes to Consolidated Financial Statements..............................F-6
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997..................................................F-22
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997......................................F-23
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997.............................F-24
Notes to Condensed Consolidated Financial Statements....................F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Consolidated Delivery & Logistics, Inc.:
We have audited the accompanying consolidated balance sheets of Consolidated
Delivery & Logistics, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These consolidated financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Consolidated
Delivery & Logistics, Inc. and subsidiaries as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statement schedules is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 25, 1998
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
ASSETS
December 31,
--------------------------------------
1997 1996
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including $64 and $50 of restricted cash
in 1997 and 1996, respectively (Note 2) $1,812 $1,757
Accounts receivable, less allowance for doubtful accounts of $1,433
and $1,598 in 1997 and 1996, respectively (Note 9) 21,275 21,018
Deferred income taxes (Notes 2 and 11) 1,207 1,046
Prepaid expenses and other current assets (Note 5) 1,785 1,284
Net assets of discontinued operations (Note 4) - 1,265
------------------ ------------------
Total current assets 26,079 26,370
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net (Notes 2 and 6)
5,667 3,857
INTANGIBLE ASSETS, net (Notes 2, 3 and 7) 3,098 3,844
SECURITY DEPOSITS AND OTHER ASSETS (Note 4) 1,305 394
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS (Note 4) 10 536
------------------ ------------------
Total assets $36,159 $35,001
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 9) $7,360 $7,200
Current maturities of long-term debt (Note 9) 3,280 1,152
Accounts payable 6,364 6,295
Accrued expenses and other current liabilities (Notes 8, 15 and 17) 6,292 5,549
Income taxes payable (Notes 2 and 11) 141 165
Deferred revenue (Note 2) 71 537
Net liabilities of discontinued operations (Note 4) 52 -
------------------ -------------------
Total current liabilities 23,560 20,898
------------------ -------------------
LONG-TERM DEBT, net of current maturities (Note 9) 2,240 3,415
------------------ -------------------
DEFERRED INCOME TAXES PAYABLE (Notes 2 and 11) 1,050 1,027
------------------ -------------------
OTHER LONG-TERM LIABILITIES (Note 17) 695 931
------------------ -------------------
COMMITMENTS AND CONTINGENCIES (Notes 12 and 14)
STOCKHOLDERS' EQUITY (Notes 13 and 14):
Preferred stock, $.001 par value; 2,000,000 shares authorized; no
shares issued and outstanding - -
Common stock, $.001 par value; 30,000,000 shares authorized,
6,666,884 and 6,795,790 shares issued and outstanding in
1997 and 1996, respectively 7 7
Additional paid-in capital 9,026 9,601
Accumulated deficit (419) (878)
------------------ -------------------
Total stockholders' equity 8,614 8,730
------------------ -------------------
Total liabilities and stockholders' equity $36,159 $35,001
================== ===================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
For the Years Ended December 31,
------------------------------------------------------------------
1997 1996 1995
------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Revenue (Note 2) $171,502 $163,090 $37,322
Cost of revenue 130,577 122,531 26,036
------------------- ---------------------- ----------------------
Gross profit 40,925 40,559 11,286
Selling, general and administrative expenses 38,223 42,027 10,708
------------------- ---------------------- ----------------------
Operating income (loss) 2,702 (1,468) 578
Other (income) expense
Gain on sale of subsidiary, net (Note 16) (816) - -
Interest expense 1,144 805 274
Other income, net (171) (461) (364)
------------------- ---------------------- ----------------------
Other (income) expense, net 157 344 (90)
------------------- ---------------------- ----------------------
Income (loss) from continuing operations before
provision for (benefit from) income taxes 2,545 (1,812) 668
Provision for (benefit from) income taxes
(Notes 2 and 11) 888 (958) 694
------------------- ---------------------- ----------------------
Income (loss) from continuing operations 1,657 (854) (26)
------------------- ---------------------- ----------------------
Discontinued operations (Note 4)
Income (loss) from discontinued operations, net of
income taxes (1,221) 171 (169)
Gain on disposal of assets, net of provision for
income taxes 23 - -
------------------- ---------------------- ----------------------
Income (loss) from discontinued operations (1,198) 171 (169)
------------------- ---------------------- ----------------------
Net income (loss) $459 ($683) ($195)
=================== ====================== ======================
Basic and diluted income (loss) per share (Note 2):
Continuing operations $.25 ($.13) ($.02)
Discontinued operations (.18) .03 (.08)
------------------- ---------------------- -----------------------
Net income (loss) per share $.07 ($.10) ($.10)
=================== ====================== ======================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 13)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(in thousands except share data)
Common Stock Additional Total
------------------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1994 2,100,000 $ 2 $ - $ - $ 2
Repurchase of shares pursuant
to a termination agreement (1,400,000) (1) - - (1)
Reduction in ownership of
shares pursuant to a
management agreement (305,577) - - - -
Issuance of common stock:
Public offering, net of offering
costs 3,200,000 3 33,148 - 33,151
Acquisition of Founding
Companies 2,935,700 3 (3) - -
Distributions to Founding
Companies' Stockholders - - (29,604) - (29,604)
Shares issued in connection
with termination agreement 99,446 - - - -
Equity of Founding Companies - - 5,972 - 5,972
Distributions to stockholders - - (949) - (949)
Charge to capital in an amount
equal to the current income
tax benefit of S Corporations - - (65) - (65)
Net loss - - - (195) (195)
---------------- ------------- --------------- ---------------- ---------------
BALANCE AT
DECEMBER 31, 1995 6,629,569 7 8,499 (195) 8,311
Shares issued in connection with
acquisitions of businesses 166,221 - 1,102 - 1,102
Net loss - - - (683) (683)
---------------- ------------- --------------- ---------------- ---------------
BALANCE AT
DECEMBER 31, 1996 6,795,790 7 9,601 (878) 8,730
Retirement of common stock
pursuant to sale of subsidiary (137,239) - (600) - (600)
Shares issued in connection with
acquisition of a business 8,333 - 25 - 25
Net income - - - 459 459
---------------- ------------- --------------- ---------------- ---------------
BALANCE AT
DECEMBER 31, 1997 6,666,884 $7 $9,026 ($419) $8,614
================ ============= =============== ================ ===============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For The Years Ended December 31,
--------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 1995
------------------- -------------- -------------
<S> <C> <C> <C>
Net income (loss) $459 ($683) ($195)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities -
(Gain) Loss on disposal of equipment and leasehold improvements (22) 29 63
Gain on sale of subsidiary (816) - -
(Income) loss from discontinued operations 1,221 (171) 169
Gain on disposal of assets of discontinued operations (23) - -
Depreciation and amortization 2,271 1,559 418
Provision for doubtful accounts 1,117 1,315 174
Capital contribution equal to current income taxes of S
Corporations - - (65)
Deferred income tax (expense) benefit (35) (752) 77
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable (2,005) (4,235) 993
Prepaid expenses and other current assets (415) (477) 3,362
Other assets (303) 513 203
Increase (decrease) in -
Accounts payable, accrued liabilities and income taxes
payable 1,359 (1,518) (1,211)
Other long-term liabilities (236) 736 (33)
------------------- -------------- -------------
Net cash provided by (used in) operating
activities of continuing operations 2,572 (3,684) 3,955
------------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold improvements (1,191) (1,279) (353)
Proceeds from sales of equipment and leasehold improvements 112 66 -
Proceeds from sale of assets of discontinued operations 125 - -
Purchases of businesses, net of cash acquired - (1,176) (651)
Other, net - - (26)
------------------- -------------- -------------
Net cash used in investing activities (954) (2,389) (1,030)
------------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 160 4,397 550
Proceeds from 8% Subordinated Convertible Debentures - - 2,000
Proceeds from long-term debt - 113 513
Repayments of long-term debt (1,393) (3,077) (1,411)
Issuance of Common Stock, net of offering costs - - 33,151
Cash acquired through acquisition of Founding Companies - - 1,172
Distributions to stockholders - - (949)
Distributions to Founding Companies' Stockholders - - (29,604)
Deferred financing costs (125) (152) -
Repurchase of Common Stock - - (1)
------------------- -------------- -------------
Net cash (used in) provided by financing activities (1,358) 1,281 5,421
------------------- -------------- -------------
CASH USED BY DISCONTINUED OPERATIONS (205) (611) (1,188)
------------------- -------------- -------------
Net increase (decrease) in cash and cash
equivalents 55 (5,403) 7,158
CASH AND CASH EQUIVALENTS, beginning of year 1,757 7,160 2
------------------- -------------- -------------
CASH AND CASH EQUIVALENTS, end of year $1,812 $1,757 $7,160
=================== ============== =============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS:
Consolidated Delivery & Logistics, Inc. ("CD&L") was founded in June 1994. In
November 1995, simultaneously with the closing of CD&L's initial public offering
(the "Offering") separate wholly-owned subsidiaries of CD&L merged (the
"Merger") with each of the eleven acquired businesses. Consideration for the
acquisition of these businesses consisted of a combination of cash and common
stock of CD&L, par value $0.001 per share. The assets and liabilities of the
acquired businesses at September 30, 1995 were recorded by CD&L at their
historical amounts.
Consolidated Delivery & Logistics, Inc. and Subsidiaries (the "Company")
provides an extensive network of same-day ground and air delivery services to a
wide range of commercial, industrial and retail customers. The Company's ground
delivery operations currently are concentrated on the East Coast, with a
strategic presence in the Midwest and on the West Coast. The Company's air
delivery services are provided throughout the United States and to major cities
around the world.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation -
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.
Use of Estimates in Preparation of the Financial Statements -
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. Cash equivalents are carried at
cost, which approximates market value. Included in cash and cash equivalents is
cash restricted for a national marketing and advertising program for the
Company's sales agency agreements (see Note 12).
Equipment and Leasehold Improvements -
Equipment and leasehold improvements are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements and assets subject to capital leases are
amortized over the shorter of the terms of the leases or lives of the assets.
Deferred Financing Costs -
The costs incurred for obtaining financing, including all related legal and
accounting fees are included in other assets in the accompanying consolidated
balance sheets and are amortized over the life of the related financing (2
years).
<PAGE>
Intangible Assets -
Intangible assets consist of goodwill, customer lists, and noncompete
agreements. Goodwill represents the excess of the purchase price over the fair
value of assets of businesses acquired and is amortized on a straight-line basis
over 25 years. Customer lists and noncompete agreements are amortized over the
estimated period to be benefited, generally from 3 to 5 years.
Revenue Recognition -
Revenue is recognized when the shipment is completed, or when services are
rendered to customers, and expenses are recognized as incurred. Certain
customers pay in advance, giving rise to deferred revenue.
Income Taxes -
The Company accounts for income taxes utilizing the liability approach. Deferred
income taxes are provided for differences in the recognition of assets and
liabilities for tax and financial reporting purposes. Temporary differences
result primarily from accelerated depreciation and amortization for tax
purposes, various accruals and reserves being deductible for tax purposes in
future periods and certain acquired businesses reporting on the cash basis for
income tax purposes prior to the Merger.
Long-Lived Assets -
The Company reviews its long-lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. The measurement of impairment losses
to be recognized is based on the difference between the fair values and the
carrying amounts of the assets. Impairment would be recognized in operating
results if a diminution in value occurred. The Company does not believe that any
such changes have occurred.
Fair Value of Financial Instruments -
Due to the short maturities of the Company's cash, receivables and payables, the
carrying value of these financial instruments approximates their fair values.
The fair value of the Company's debt is estimated based on the current rates
offered to the Company for debt with similar remaining maturities. The Company
believes that the carrying value of its debt estimates the fair value of such
debt instruments.
Stock Based Compensation -
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") requires that an entity account for employee stock
compensation under a fair value based method. However, SFAS 123 also allows an
entity to continue to measure compensation cost for employee stock-based
compensation plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
("Opinion 25"). The Company has elected to continue to account for employee
stock-based compensation under Opinion 25 and provide the required pro forma
disclosures as if the fair value based method of accounting under SFAS 123 had
been applied. (see Note 14).
Segment Reporting -
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS 131") introduces a new model
for segment reporting, called the "management approach." The management approach
is based on the way that management organizes segments within a company for
making operating decisions and assessing performance. Reportable segments are
based on products and services, geography, legal structure, management structure
- - any manner in which management disaggregates a company. The management
approach replaces the notion of industry and geographic segments in current
accounting standards. SFAS 131 is effective for fiscal years beginning after
December 15, 1997 and early adoption is encouraged. However, SFAS 131 need not
be applied to interim statements in the initial year of application. SFAS 131
requires restatement of all prior period information reported. The Company
intends to adopt this standard when required and is in the process of
determining the effect of SFAS 131 on the Company's financial statements.
Income (Loss) Per Share -
The Company has implemented Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), which establishes standards for the method of
computation, presentation and disclosure for earnings per share ("EPS"). SFAS
128 simplifies the standards for computing EPS previously found in APB Opinion
No. 15, "Earnings Per Share," and makes them comparable to international EPS
standards. It requires the presentation of two EPS amounts, basic and diluted,
on the face of the income statement for all entities with complex capital
structures and the restatement of all prior period EPS calculations presented.
Previously reported EPS amounts were not affected by the adoption of this new
standard. Basic earnings per share represents net income (loss) divided by the
weighted average shares outstanding. Diluted earnings per share represents net
income (loss) divided by weighted average shares outstanding adjusted for the
incremental dilution of common stock equivalents. There were no differences
between basic and diluted EPS for 1997, 1996 and 1995 since the conversion of
the debentures into 180,995 shares of common stock (see Note 9) and conversion
of the stock options (see Note 14) were antidilutive for 1996 and 1995 and the
dilutive amount of options for 1997 was not significant.
A reconciliation of weighted average common shares outstanding to weighted
average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Basic weighted average common
shares oustanding 6,672,284 6,677,546 2,059,894
Effect of dilutive securities:
Stock options 2,656 - -
------------- ------------- -------------
Diluted weighted average common
shares outstanding 6,674,940 6,677,546 2,059,894
============= ============= =============
</TABLE>
Options to purchase 579,795, 475,295 and 37,445 shares of common stock in 1997,
1996 and 1995, respectively, were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common shares.
Reclassifications -
Certain reclassifications have been made to the prior years' consolidated
financial statements in order to conform to the 1997 presentation.
<PAGE>
(3) BUSINESS COMBINATIONS:
During 1996, the Company acquired certain businesses in transactions accounted
for as purchases. The total consideration paid in these transactions is
contingent upon future activity and is estimated to aggregate $3.3 million,
which consists of $2.2 million in cash, 75,312 shares of Common Stock at $8 per
share and 90,909 shares of Common Stock at $5.50 per share. The Company also
assumed approximately $185,000 of debt due to the former owners of one of the
acquired businesses and their relatives. Of this amount $3.1 million has been
assigned to the excess of purchase price over net assets of businesses acquired
(goodwill) and other intangible assets. The purchase price was subsequently
reduced by approximately $357,000 during 1997 due to actual revenue not reaching
projected revenue as stipulated in the purchase agreements. Accordingly,
goodwill and seller financed debt were reduced by this amount to reflect the
reduction in the purchase price. Final determinations of the individual
acquisition costs will be made by April 2000.
In November 1995, the Company purchased certain assets of two Companies. The
total consideration paid in these transactions aggregated approximately
$900,000. The assets acquired include accounts receivable, customer lists,
machinery and equipment and various other assets. The transactions were
accounted for as purchases and resulted in excess of the purchase price over net
assets acquired (goodwill) of $501,000. One of the companies acquired was 50%
owned by stockholders of the Company.
The results of the acquired businesses have been reflected in the accompanying
consolidated statements of operations since their respective acquisition dates.
The results of operations of the acquired businesses prior to their acquisitions
are not material to the Company's consolidated statements of operations.
(4) DISCONTINUED OPERATIONS:
In October 1997, the Company announced its intention to pursue a plan to dispose
of its fulfillment and direct mail business. On December 31, 1997, the Company
entered into an agreement providing for the sale of certain assets of its
fulfillment and direct mail business. The purchase price for the assets was
$850,000 and is comprised of $125,000 in cash with the remainder in the form of
a promissory note (the "Note Receivable"). The Note Receivable will bear
interest at the rate of 6% per annum, with interest only in monthly installments
during 1998. Commencing February 1, 1999 the Note Receivable will be paid in
equal monthly installments of $14,016 including principal and interest through
January 1, 2004. The Note Receivable which totals $725,000 and is included in
security deposits and other assets in the accompanying consolidated balance
sheet as of December 31, 1997 and is collateralized by a security interest in
the purchaser's accounts receivable, equipment and general intangibles. The
security interest is subordinate to the interest of the purchaser's majority
shareholder.
Accordingly, the financial position, operating results and the gain on the
disposition of the Company's fulfillment and direct mail business have been
segregated from continuing operations and reclassified as a discontinued
operation in the accompanying consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Results from the discontinued fulfillment and direct mail business were as follows (in thousands) -
For the Years Ended December 31,
1997 1996 1995
---------------- --------------- ------------------
<S> <C> <C> <C>
Revenue $5,937 $7,959 $1,714
================ =============== ==================
Income (loss) from discontinued
operations, net of income tax provision
(benefit) of ($811), $114 and ($112) in
1997, 1996 and 1995 ($1,221) $171 ($169)
================ =============== ==================
Gain on disposal of assets, net of
income tax provision of $15 in 1997 $23 $ - $ -
================ =============== ==================
</TABLE>
<TABLE>
<CAPTION>
The net assets (liabilities) of discontinued operations are comprised of the following (in thousands) -
December 31,
--------------------------------------------
1997 1996
------------------ ------------------
<S> <C> <C>
Current assets $3,829 $4,124
Current liabilities (3,881) (2,859)
------------------ ------------------
Net current assets (liabilities) (52) 1,265
Equipment and leasehold improvements 10 459
Other non-current assets - 77
------------------ ------------------
Net assets (liabilities) of discontinued
operations ($42) $1,801
================== ==================
</TABLE>
(5) PREPAID EXPENSES AND OTHER CURRENT ASSETS:
<TABLE>
<CAPTION>
Prepaid expenses and other current assets consist of the following (in thousands) -
December 31,
---------------------------------------------
1997 1996
-------------------- ------------------
<S> <C> <C>
Other receivables $580 $326
Prepaid supplies and equipment deposits 564 78
Prepaid insurance 227 282
Prepaid shipping charges 86 96
Other 328 502
-------------------- ------------------
$1,785 $1,284
==================== ==================
</TABLE>
<PAGE>
(6) EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements consist of the following (in thousands) -
<TABLE>
<CAPTION>
December 31,
--------------------------------
Useful Lives 1997 1996
------------ --------------- --------------
<S> <C> <C> <C>
Transportation and warehouse equipment 3-7 years $6,603 $4,995
Office equipment 3-7 years 4,443 5,107
Other equipment 5-7 years 811 729
Leasehold improvements Lease period 1,180 1,309
--------------- --------------
13,037 12,140
Less - accumulated depreciation and amortization (7,370) (8,283)
--------------- --------------
$5,667 $3,857
=============== ==============
</TABLE>
<TABLE>
<CAPTION>
Leased equipment under capitalized leases (included above) consists of the following (in thousands) -
December 31,
--------------------------------
1997 1996
---------------- --------------
<S> <C> <C>
Equipment $3,521 $952
Less - accumulated amortization (909) (347)
---------------- --------------
$2,612 $605
================ ==============
</TABLE>
The Company incurred a capital lease obligation of $2.5 million during 1997 in
connection with an agreement to lease 175 delivery vehicles.
(7) INTANGIBLE ASSETS:
Intangible assets (see Note 3) consist of the following (in thousands) -
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
------------- --------------
<S> <C> <C>
Goodwill $2,992 $3,616
Noncompete agreements 336 336
Customer lists 242 167
Other 118 165
-------------- --------------
3,688 4,284
Less - accumulated amortization (590) (440)
--------------- --------------
$3,098 $3,844
=============== ==============
</TABLE>
(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>
Accrued expenses and other current liabilities consist of the following (in thousands) -
December 31,
-------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Payroll and related expenses $3,088 $2,738
Third party delivery costs 1,525 605
Insurance 274 816
Professional fees 367 413
Rent 151 371
Other 887 606
--------------- --------------
$6,292 $5,549
=============== ==============
</TABLE>
(9) SHORT-TERM BORROWINGS AND LONG-TERM DEBT:
Short-term borrowings -
At December 31, 1997 and 1996, the Company had line of credit agreements for $15
million and $10 million, respectively. The Company's outstanding borrowings on
such lines of credit were approximately $7.4 million at December 31, 1997 and
$7.2 million at December 31, 1996.
In July 1997, the Company entered into a two-year agreement with First Union
Commercial Corporation ("First Union") to establish a revolving credit facility
(the "First Union Agreement"). The proceeds of the credit facility were used to
repay borrowings under the credit agreement with Summit Bank and Mellon Bank
N.A. (See below). Credit availability is based on eligible amounts of accounts
receivable, as defined, up to a maximum amount of $15 million and is secured by
substantially all of the assets, including certain cash balances, accounts
receivable, equipment and leasehold improvements and general intangibles of the
Company and its subsidiaries. The First Union Agreement provides for fixed rate
and variable rate loans. Interest rates on fixed rate borrowings are based on
LIBOR, which was 5.81% at December 31, 1997, plus 1.5% to 2%. Variable rate
borrowings are based on First Union's prime lending rate, which was 8.5% at
December 31, 1997, minus .25% to plus .25%. Based on eligible accounts
receivable at December 31, 1997, $3.9 million of the facility was available for
future borrowing.
Under the terms of the First Union Agreement, the Company is required to
maintain certain financial ratios and comply with other financial conditions.
The First Union Agreement also prohibits the Company from incurring certain
additional indebtedness, limits certain investments, advances or loans and
restricts substantial asset sales, capital expenditures and cash dividends. At
December 31, 1997 the Company was in compliance with all loan covenants.
Borrowings under the line of credit facility averaged approximately $7.7 million
with an average interest rate of 9.9% for the year ended December 31, 1997.
Maximum borrowings were $9.6 million for the same period.
In May 1996, the Company entered into a credit agreement (the"Credit Agreement")
with Summit Bank and Mellon Bank N.A. (the "Banks") to establish a revolving
credit facility. The line of credit was secured by substantially all assets of
the Company and provided for fixed rate and variable rate loans. Interest rates
on fixed rate borrowings were based on the London Inter-bank Offered Rate (the
"LIBOR") and variable rate borrowings were based on margins over the Banks'
lending rates. The line of credit was repaid in July 1997. In 1997, average
borrowings under this line of credit were approximately $8.1 million with an
average interest rate of 9.4%. Maximum borrowings for 1997 were approximately
$8.3 million. Borrowings under the line of credit averaged approximately $6.6
million with an average interest rate of 8.23% for the year ended December 31,
1996. Maximum borrowings were $7.3 million for the year ended December 31, 1996.
In 1996, the Company also had several available lines of credit which bore
interest at rates ranging from prime plus 0.75% to prime plus 1.5%. These lines
of credit were collateralized by certain subsidiaries' accounts receivable and
guaranteed by certain stockholders. In 1996, average borrowings under these
lines of credit were approximately $2.5 million with an average interest rate of
8.2%. Maximum borrowings for 1996 were approximately $2.9 million. These lines
of credit were repaid during 1996.
Long-Term Debt -
Long-term debt consists of the following (in thousands) -
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- ------------
<C> <C> <C>
8% Subordinated Convertible Debentures (a) $2,000 $2,000
Capital lease obligations due through October 2000 with interest at rates ranging
from 5.3% to 15.2% and secured by the related property. 2,631 476
Seller-financed debt on acquisitions, payable in annual and quarterly installments
through April 1998 and monthly payments based on collected revenues through
September 2000 with interest imputed at the rate of 9%. 611 1,348
Various equipment and vehicle notes payable to banks and finance companies due
through January 2000 with interest ranging from 8.0% to 12.5% and secured by
various assets of certain subsidiaries. 133 501
Debt due to former owners, their relatives, and employees of a business acquired
by the Company in 1996, with quarterly principal and interest payments through
September 2001 together with interest at a rate of 8%. 145 185
Other - 57
----------- ------------
5,520 4,567
Less - Current maturities 3,280 1,152
----------- ------------
$2,240 $3,415
=========== ============
</TABLE>
(a) In September 1995, the Company issued $2 million in the aggregate principal
amount of its 8% Subordinated Convertible Debentures (the "Debentures"). The
Debentures mature on August 21, 2000. Interest on the Debentures accrues at the
rate of 8% per annum and is payable quarterly. The Debentures are redeemable at
the option of the Company, in whole or in part, without premium or penalty at
any time on or after August 18, 1998, at their face amount plus accrued and
unpaid interest, if any, to the date of redemption. The Debentures are
redeemable at the option of the holder, in whole but not in part, without
premium or penalty, at any time after August 21, 1998. Accordingly, the Company
has included the Debentures totaling $2 million in current maturities of
long-term debt at December 31, 1997. The Debentures are convertible into 180,995
shares of Common Stock at the option of the holder through August 20, 2000.
The aggregate annual principal maturities of debt (excluding capital lease
obligations) as of December 31, 1997 are as follows (in thousands) -
1998 $2,354
1999 258
2000 196
2001 81
-----------------
Total $2,889
=================
<PAGE>
The Company leases certain transportation equipment under capital lease
agreements which expire at various dates. At December 31, 1997, minimum annual
payments under capital leases, including interest, are as follows
(in thousands)-
1998 $1,096
1999 1,075
2000 733
---------------
Total minimum payments 2,904
Less - Amounts representing interest (273)
---------------
Net minimum payments 2,631
Less - Current portion of obligations
under capital leases (926)
---------------
Long-term portion of obligations under
capital leases $1,705
===============
(10) EMPLOYEE BENEFIT PLANS:
Several subsidiaries had defined contribution plans, which allowed for voluntary
pretax contributions by the employees. The subsidiaries paid all general and
administrative expenses of the plans and in some cases made matching
contributions on behalf of the employees. The Company adopted a 401(k)
retirement plan during 1996 and merged all of the subsidiary plans into the
newly adopted plan. Substantially all employees are eligible to participate in
the plan and are permitted to contribute between 1% and 20% of their annual
salary. The Company has the right to make discretionary contributions which will
be allocated to each eligible participant. The Company did not make
discretionary contributions for the years ended December 31, 1997 and 1996.
(11) INCOME TAXES:
Federal and state income tax provision (benefit) for the years ended December
31, 1997, 1996 and 1995 are as follows (in thousands) -
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- -----------------
Federal-
<S> <C> <C> <C>
Current $723 ($60) $511
Deferred (35) (752) 77
State 200 (146) 106
--------------- --------------- -----------------
$888 ($958) $694
=============== =============== =================
</TABLE>
The differences in Federal income taxes provided and the amounts determined by
applying the Federal statutory tax rate (34%) to income (loss) from continuing
operations before income taxes for the years ended December 31, 1997, 1996 and
1995, result from the following (in thousands) -
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ------------------
<S> <C> <C> <C>
Tax at statutory rate $865 $(616) $227
Add (deduct) the effect of-
State income taxes 132 (96) 70
Nondeductible expenses and other, net (109) 65 27
Provision for potential tax matters - - 400
Reduction of estimated taxes provided
in the prior year - (311) -
Other - - (30)
---------------- ---------------- ------------------
$888 ($958) $694
================ ================ ==================
</TABLE>
The acquired businesses filed "short-period" Federal tax returns through
November 30, 1995. In connection with such filings the Company provided $400,000
during 1995 to cover any potential exposures related to the filings, which was
subsequently reduced by $311,000 in 1996.
<TABLE>
<CAPTION>
The components of deferred income tax assets and liabilities, are as follows (in thousands) -
December 31,
-----------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Current deferred income tax asset -
Allowance for doubtful accounts $633 $690
Reserves and other, net 574 356
---------------- ---------------
Total deferred income tax asset $1,207 $1,046
================ ===============
Non-current deferred income tax liability -
Cash to accrual differences, net ($176) ($369)
Accumulated depreciation and amortization (320) (161)
Other (554) (497)
--------------- ---------------
Total deferred income tax liability ($1,050) ($1,027)
================ ===============
</TABLE>
(12) COMMITMENTS AND CONTINGENCIES:
Operating Leases -
The Company leases its office and warehouse facilities under noncancellable
operating leases, which expire at various times through January 2007. The
approximate minimum rental commitments of the Company, under existing agreements
as of December 31, 1997, are as follows (in thousands) -
1998 $3,094
1999 2,502
2000 2,033
2001 1,600
2002 707
Thereafter 2,019
Rent expense related to operating leases amounted to approximately $3.5 million,
$3.8 million and $1.6 million for the years ended December 31, 1997, 1996 and
1995, respectively. In connection with the sale of the assets of Logistics (see
Note 5), the Company guaranteed the warehouse lease obligation covering
Logistic's principal place of business (the "Facility Lease") for one year
commencing January 1, 1998. The purchaser's majority shareholder has personally
guaranteed the Facility Lease in favor of the Company for six months commencing
January 1, 1998. The Company's maximum exposure as guarantor is approximately
$396,000 at December 31, 1997.
Litigation -
On March 19, 1997, a purported class action complaint, captioned Gapszewicz v.
Consolidated Delivery & Logistics, Inc., et al. (97 Civ. 1939), was filed in the
United States District Court for the Southern District of New York (the "Court")
against the Company, certain of the Company's present and former executive
officers, and the co-managing underwriters of the Company's initial public
offering (the "Offering"). The gravamen of the complaint is that the Company's
registration statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the Company's
financial statements included in the registration statement were false and
misleading and did not fairly reflect the Company's true financial condition.
The complaint seeks the certification of a class consisting of purchasers of the
Company's Common Stock from November 21, 1995 through February 27, 1997,
rescission of the Offering, attorneys' fees and other damages. In April 1997,
five other complaints containing allegations identical to the Gapszewicz
complaint were filed in the same federal court against the Company. On May 27,
1997, these six complaints were consolidated into a single action entitled "In
re Consolidated Delivery & Logistics, Inc. Securities Litigation". On July 16,
1997, the Company and the underwriter defendants filed a motion to dismiss the
complaint. In response, the plaintiffs filed an amended complaint on October 20,
1997. A motion to dismiss the amended complaint was filed by the Company and the
underwriter defendants on December 15, 1997. No ruling on the Company's motion
has been rendered by the Court. The Company believes the allegations contained
in the amended complaint are without merit and intends to continue to vigorously
defend the action.
The Company and its subsidiaries are from time to time, parties to litigation
arising in the normal course of their business, most of which involves claims
for personal injury and property damage incurred in connection with their
operations. Management believes that none of these actions, including the above
action, will have a material adverse effect on the financial position or results
of operations of the Company and its subsidiaries.
Sales Agency Agreements -
The Company has entered into sales agency agreements with independent
contractors with varying terms to perform courier services on behalf of the
Company. The independent contractors provide marketing and sales services and
the Company provides the resources to perform courier services. In connection
with these transactions the Company retains from the independent contractors a
fee for services rendered of approximately 10% of revenues. The profit on these
sales net of the Company's fees for its services are remitted back to the
independent contractors as payment for marketing and sales services rendered.
Sales agency charges totaled $4.7 million, $3.8 million and $1 million in 1997,
1996 and 1995, respectively.
(13) STOCKHOLDERS' EQUITY:
Pursuant to a Representation Agreement, dated November 15, 1994 (as amended, the
"Representation Agreement"), between the Company and CTA Group, LLC ("CTA"),
David T. Lardier agreed to lend or otherwise advance to the Company all funds
necessary to effect the Mergers and to provide CTA with all funds necessary to
provide the services to be provided by CTA under the Representation Agreement,
including but not limited to, the funds necessary to retain and pay certain
professional expenses incurred in connection therewith. In exchange, the Company
agreed upon completion of the Mergers to reimburse Mr. Lardier for the amounts
advanced.
At June 30, 1995, CTA had incurred expenses totaling approximately $1.3 million
in connection with the Mergers (consisting primarily of professional fees and
expenses) for which it had not been reimbursed by Mr. Lardier. Under the terms
of the Representation Agreement, Messrs. Mattei and Wojak had the right to
require the Company to repurchase the 1,400,000 shares of common stock held by
Mr. Lardier at a price of $1,000 (his original purchase price) in the event that
Mr. Lardier did not advance funds needed to complete the Mergers.
Pursuant to Mr. Lardier's failure to perform under the Representation Agreement,
CTA redeemed his shares for his original purchase price. Pursuant to a
Termination Agreement, dated August 14, 1995 (the "Termination Agreement") the
Company agreed to permit Mr. Lardier to assign 99,446 shares of common stock and
his contingent right to repayment of funds advanced plus interest (fixed at $1.2
million) to certain of Mr. Lardier's creditors in exchange for their releases of
all claims against CTA and the Company. In addition, Mr. Lardier agreed that CTA
was not entitled to any fee upon the completion of the Mergers. The Company has
also agreed to release Mr. Lardier from any obligation to fund the unreimbursed
expenses incurred by CTA prior to the date of the Termination Agreement and his
continuing obligation to fund future expenses.
Under a management agreement in 1995, certain officers reduced their ownership
of Common Stock by 305,577 shares to an aggregate of 394,423 shares.
(14) STOCK OPTION PLANS:
The Company has two stock option plans under which employees and independent
directors may be granted options to purchase shares of Company Common Stock at
or above the fair market value at the date of grant. Options generally vest in
one to four years and expire in 10 years.
Employee Stock Compensation Program -
In September 1995, the Board of Directors adopted, and the stockholders of the
Company approved the Company's Employee Stock Compensation Program (the
"Employee Stock Compensation Program"). The Employee Stock Compensation Program
authorizes the granting of incentive stock options, non-qualified supplementary
options, stock appreciation rights, performance shares and stock bonus awards to
key employees of the Company, including those employees serving as officers or
directors of the Company. The Company has reserved 1,400,000 shares of Common
Stock for issuance in connection with the Employee Stock Compensation Program.
The Employee Stock Compensation Program is administered by a committee of the
Board of Directors (the "Administrators") made up of directors who are
disinterested persons. Options and awards granted under the Employee Stock
Compensation Program will have an exercise or payment price as established by
the Administrators provided that the exercise price of incentive stock options
may not be less than the fair market value of the underlying shares on the date
of grant. Unless otherwise specified by the Administrators, options and awards
will vest in four equal installments on the first, second, third and fourth
anniversaries of the date of grant.
<PAGE>
1995 Stock Option Plan for Independent Directors -
In September 1995, the Board of Directors adopted, and the stockholders of the
Company approved, the Company's 1995 Stock Option Plan for Independent Directors
(the "Director Plan"). The Director Plan authorizes the granting of
non-qualified stock options to non-employee directors of the Company. The
Company has reserved 100,000 shares of Common Stock for issuance in connection
with the Director Plan. The Director Plan is administered by a committee of the
Board of Directors (the "Committee"), none of whom will be eligible to
participate in the Director Plan. The Director Plan provided for an initial
grant of an option to purchase 1,500 shares of Common Stock upon election as a
director of the Company, a second option to purchase 1,000 shares of Common
Stock upon the one-year anniversary of such director's election and subsequent
annual options for 500 shares of Common Stock upon the anniversary of each year
of service as a director. In August 1997, the Board of Directors approved
amendments to the Director Plan. The amendments replace the annual stock option
grants of the original plan with grants of 1,250 shares of stock options on the
first trading day of each fiscal quarter commencing on October 1, 1997. The
amendments to the Director Plan are subject to shareholder approval at the next
annual meeting and accordingly the 5,000 options granted during 1997 under the
amended plan will be void if shareholder approval is not obtained.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
Weighted
Number Average
Of Exercise
Shares Price
------------------ -----------------
<S> <C> <C>
Outstanding at January 1, 1995 -
Granted 395,000 $13.00
Exercised - -
Canceled - -
------------------
Outstanding at December 31, 1995 395,000 $13.00
Granted 219,706 (1) $8.86
Exercised - -
Canceled (52,138) $13.00
------------------
Outstanding at December 31, 1996 562,568 $11.36
Granted 444,928 $3.85
Exercised - -
Canceled (99,373) $10.15
------------------
Outstanding at December 31, 1997 908,123 $7.80
==================
Options exercisable at:
December 31, 1995 - -
================== =================
December 31, 1996 131,037 $11.94
================== =================
December 31, 1997 576,592 $7.33
================== =================
</TABLE>
(1) Includes 100,179 grants approved by the Compensation Committee of the
Board of Directors in January 1996 that were priced effective as of the
date of the Mergers (November 27, 1995).
At December 31, 1997, options available for grant under the Employee Stock
Compensation Plan and the Director Plan total 501,877 and 90,000, respectively.
<PAGE>
The following summarizes information about option groups outstanding and
exercisable at December 31, 1997:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
------------------------------------------------------- -------------------------------------
Number Number
Outstanding Weighted Weighted Exercisable Weighted
Range of as of Average Average as of Average
Exercise December 31, Remaining Exercise December 31, Exercise
Prices 1997 Life Price 1997 Price
<S> <C> <C> <C> <C> <C>
- ----------------- ------------------ ---------------- ------------- ------------------- --------------
$2.31 -
$4.75 364,492 9.73 $3.03 225,712 $3.09
$4.88 -
$7.88 160,161 9.25 $6.24 153,263 $6.25
$13.00 383,470 7.91 $13.00 197,617 $13.00
- ----------------- ------------------ ---------------- ------------- ------------------- --------------
</TABLE>
The Company adopted the provisions of SFAS 123 and has chosen to continue to
account for stock-based compensation using the intrinsic value method.
Accordingly, no compensation expense has been recognized for its stock-based
compensation plans. Pro forma information regarding net income (loss) and
earnings (loss) per share is required, and has been determined as if the Company
had accounted for its stock options under the fair value method. The fair value
for these options was estimated at the date of grant using the Black-Scholes
option pricing model with the following assumptions for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- -----------------
<S> <C> <C> <C>
Weighted average fair value $1.50 $3.06 $6.39
Risk-free interest rate 5.60% 6.50% 6.50%
Volatility factor 55% 37% 37%
Expected life 5 years 7 years 10 years
Dividend Yield None None None
--------------- --------------- -----------------
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma net income (loss) and income (loss) per share were as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- -----------------
<S> <C> <C> <C>
Net income (loss) - as reported $459 ($683) ($195)
Net income (loss) - pro forma (295) (1,399) (283)
Basic and Diluted:
Income (loss) per share - as reported .07 (.10) (.10)
Income (loss) per share - pro forma (.04) (.21) (.14)
--------------- --------------- -----------------
</TABLE>
(15) RELATED PARTY TRANSACTIONS:
Leasing Transactions -
Certain subsidiaries of the Company paid approximately $905,000, $851,000 and
$217,000 for the years ended December 31, 1997, 1996 and 1995, respectively, in
rent to certain directors, stockholders or Companies owned and controlled by
directors or stockholders of the Company. Rent is paid for office, warehouse
facilities and transportation equipment.
Administrative Fees and Other -
The Company incurred sales commissions and consulting fees of $1.3 million in
1997, $1.1 million in 1996 and $229,000 in 1995 to companies affiliated through
common ownership with directors or stockholders of the Company or to former
employees of the Company or its subsidiaries. As of December 31, 1997 and 1996,
accrued expenses and other current liabilities included approximately $274,000
and $191,000, respectively, of accrued sales commissions due to related parties.
See Note 17 for restructuring charges that pertain to related parties.
In connection with the Merger discussed in Note 1, stockholders of the acquired
businesses entered into five-year covenants-not-to-compete agreements with the
Company. Additionally, certain of the stockholders received employment
contracts.
(16) SALE OF SUBSIDIARY:
On January 31, 1997 the Company sold the stock of Distribution Solutions
International, Inc. (DSI), a subsidiary involved in contract logistics, to its
former owner and president in exchange for 137,239 shares of the Company's
common stock, valued at approximately $4.38 per share (the closing price of the
Company's common stock on the sale date.) In connection with the sale, the
Company recorded a gain of approximately $816,000 before applicable federal and
state income taxes. Revenue included in the accompanying consolidated financial
statements from the operation were approximately $400,000, $4.6 million and $1.9
million for the month of January 1997 and the years ended December 31, 1996 and
December 31, 1995, respectively. Operating losses were approximately $20,000,
$650,000 and $157,000 for the month of January 1997 and the years ended December
31, 1996 and December 31, 1995, respectively.
(17) RESTRUCTURING CHARGE:
During the fourth quarter of 1996, the Company recognized the impact of several
non-recurring charges totaling $1.4 million ($0.12 per share). The restructuring
charge included salary and contract settlements, abandonment of operating leases
and other costs associated with management headcount reduction and other
consolidation issues. At December 31, 1997, $339,000 was included in accrued
expenses and $344,000 was included in other liabilities, of which $275,000 and
$344,000, respectively, were payable to a former director and stockholder of the
Company or its subsidiaries. At December 31, 1996, $602,000 was included in
accrued expenses and $781,000 was included in other liabilities, of which
$275,000 and $619,000, respectively, were payable to a former director and
stockholder of the Company or its subsidiaries.
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest and income taxes for the years ended December 31,
1997, 1996 and 1995 was as follows (in thousands) -
<TABLE>
<CAPTION>
1997 1996 1995
----------------- -------------- --------------
<S> <C> <C> <C>
Interest $1,024 $831 $177
Income taxes 245 878 383
----------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Supplemental schedule of noncash financing activities for the years ended December 31, 1997, 1996 and 1995 was as
follows (in thousands) -
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Capital lease obligations incurred $2,700 $202 $238
Seller financed debt related to purchase of businesses 50 1,929 52
Issuances of common stock in connection with purchases
of businesses 25 1,102 -
Adjustment of purchase price for businesses
previously acquired 357 - -
Note receivable issued in connection with disposal of
assets of discontinued operations 725 - -
----------------- -------------- --------------
</TABLE>
(19) SUBSEQUENT EVENT:
During February 1998, the Board of Directors approved, subject to shareholder
approval, the Employee Stock Purchase Plan ("Employee Purchase Plan"), effective
April 1, 1998. The Employee Purchase Plan permits eligible employees to purchase
Company common stock at 85% of the closing market price on the last trading day
prior to the commencement of the purchase period. It is intended to be an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share information)
March 31, December 31, 1997
1998
----------------- -------------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $853 $1,812
Accounts receivable, net 18,588 21,275
Prepaid expenses and other current assets 2,721 2,992
----------------- -------------------
Total current assets 22,162 26,079
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 6,144 5,667
OTHER ASSETS 3,998 4,403
NONCURRENT ASSETS OF DISCONTINUED
OPERATIONS - 10
----------------- -------------------
Total assets $32,304 $36,159
================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $4,353 $7,360
Current maturities of long-term debt 2,501 3,280
Accounts payable and accrued liabilities 12,385 12,868
Net liabilities of discontinued operations 88 52
----------------- -------------------
Total current liabilities 19,327 23,560
LONG-TERM DEBT 2,511 2,240
OTHER LONG-TERM LIABILITIES 1,611 1,745
----------------- ------------------
Total liabilities 23,449 27,545
----------------- -------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 2,000,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 30,000,000 shares
authorized; 6,666,884 shares issued and outstanding
at March 31, 1998 and December 31, 1997 7 7
Additional paid-in capital 9,026 9,026
Accumulated deficit (178) (419)
----------------- -------------------
Total stockholders' equity 8,855 8,614
----------------- -------------------
Total liabilities and stockholders' equity $32,304 $36,159
================= ===================
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Three Months Ended March
31,
-----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Revenue $42,686 $40,409
Cost of revenue 33,278 31,068
--------------- ---------------
Gross profit 9,408 9,341
Selling, general, and administrative expenses 8,823 9,712
--------------- ---------------
Operating income (loss) 585 (371)
Other (income) expense
Gain on sale of subsidiary, net - (816)
Interest expense 264 244
Other income, net (80) (95)
--------------- ---------------
Income from continuing operations before
income taxes 401 296
Provision for income taxes 160 119
--------------- ---------------
Income from continuing operations 241 177
Loss from discontinued operations, net of tax of $44 - (66)
--------------- ---------------
Net income $241 $111
=============== ===============
Basic and diluted income (loss) per share:
Continuing operations $.04 $.03
Discontinued operations - (.01)
--------------- ---------------
Net income per share $.04 $.02
=============== ===============
Basic weighted average common shares outstanding 6,667 6,706
=============== ===============
Diluted weighted average common shares outstanding 6,783 6,706
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three Months Ended
March 31,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $241 $111
Adjustments to reconcile net income to net cash provided by
operating activities -
Gain on disposal of equipment and leasehold improvements - (6)
Gain on sale of subsidiary - (816)
Depreciation and amortization 614 360
Changes in operating assets and liabilities
(Increase) decrease in -
Accounts receivable, net 2,686 911
Prepaid expenses and other current assets 271 (719)
Other assets 211 (282)
Increase (decrease) in -
Accounts payable and accrued liabilities (483) 857
Other long-term liabilities (134) 306
-------------- --------------
Net cash provided by operating activities 3,406 722
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment and leasehold improvements - 22
Additions to equipment and leasehold improvements (1,033) (274)
-------------- --------------
Net cash used in investing activities (1,033) (252)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings (repayments), net (3,007) 1,050
Repayments of long-term debt (371) (232)
-------------- --------------
Net cash (used in) provided by financing activities (3,378) 818
-------------- --------------
CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 46 (180)
-------------- --------------
Net (decrease) increase in cash and cash equivalents (959) 1,108
CASH AND CASH EQUIVALENTS, beginning of period 1,812 1,757
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $853 $2,865
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
<PAGE>
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited financial statements at that date. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected
for any other interim period or for the year ending December 31, 1998.
Certain reclassifications have been made to prior year amounts to
conform with the current presentation, including the reclassification
of the Company's fulfillment and direct mail business as a discontinued
operation (see Note 3). For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1997.
(2) SHORT-TERM BORROWINGS:
Under the terms of its July 14, 1997 Revolving Credit Facility with
First Union Commercial Corporation (the "Bank"), the Company was not in
compliance with one of its loan covenants as of and for the three month
period ended March 31, 1998. The Bank has issued a waiver to the
Company with respect to such non-compliance for the three month period
ended March 31, 1998. The Company intends to negotiate appropriate
changes in such loan covenant.
(3) DISCONTINUED OPERATIONS:
In October 1997, the Company announced its intention to pursue a plan
to dispose of its fulfillment and direct mail business. On December 31,
1997, the Company entered into an agreement providing for the sale of
certain assets of its fulfillment and direct mail business.
Accordingly, the financial position and operating results of the
Company's fulfillment and direct mail business have been segregated
from continuing operations and reclassified as a discontinued operation
in the accompanying condensed consolidated financial statements.
Results from the discontinued fulfillment and direct mail business were
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Revenue $ - $1,326
=============== ==============
</TABLE>
The net assets (liabilities) of discontinued operations are comprised
of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------------- --------------------
<S> <C> <C>
Current assets $145 $3,829
Current liabilities (233) (3,881)
--------------------- --------------------
Net current liabilities (88) (52)
Equipment and leasehold improvements - 10
--------------------- --------------------
Net liabilities of discontinued operations ($88) ($42)
===================== ====================
</TABLE>
(4) LITIGATION:
On March 19, 1997, a purported class action complaint, captioned
Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al. (97 Civ.
1939), was filed in the United States District Court for the Southern
District of New York (the "Court") against the Company, certain of the
Company's present and former executive officers, and the co-managing
underwriters of the Company's initial public offering (the "Offering").
The gravamen of the complaint is that the Company's registration
statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the
Company's financial statements included in the registration statement
were false and misleading and did not fairly reflect the Company's true
financial condition. The complaint seeks the certification of a class
consisting of purchasers of the Company's Common Stock from November
21, 1995 through February 27, 1997, rescission of the Offering,
attorneys' fees and other damages. In April 1997, five other complaints
containing allegations identical to the Gapszewicz complaint were filed
in the same federal court against the Company. On May 27, 1997, these
six complaints were consolidated into a single action entitled "In re
Consolidated Delivery & Logistics, Inc. Securities Litigation". On July
16, 1997, the Company and the underwriter defendants filed a motion to
dismiss the complaint. In response, the plaintiffs filed an amended
complaint on October 20, 1997. A motion to dismiss the amended
complaint was filed by the Company and the underwriter defendants on
December 15, 1997. No ruling on the Company's motion has been rendered
by the Court. The Company believes the allegations contained in the
amended complaint are without merit and intends to continue to
vigorously defend the action.
The Company and its subsidiaries are from time to time, parties to
litigation arising in the normal course of their business, most of
which involves claims for personal injury and property damage incurred
in connection with their operations. Management believes that none of
these actions, including the above action, will have a material adverse
effect on the financial position or results of operations of the
Company and its subsidiaries.
(5) INCOME (LOSS) PER SHARE:
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"), in the quarter
ended December 31, 1997. SFAS 128 establishes standards for the method
of computation, presentation and disclosure for earnings per share
("EPS") and requires the presentation of basic and diluted EPS.
Previously reported EPS amounts were not affected by the adoption of
this new standard. There were no differences between basic and diluted
EPS for the three months ended March 31, 1998 and 1997. The conversion
of the debentures into common stock (see Note 6) were antidilutive for
1998 and 1997. The dilutive amount of stock options was not significant
for 1998 and the conversion of the stock options were antidilutive for
1997.
A reconciliation of weighted average common shares outstanding to
weighted average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Basic weighted average common
shares oustanding 6,666,884 6,705,822
Effect of dilutive securities:
Stock options 115,832 -
--------------- --------------
Diluted weighted average common
shares outstanding 6,782,716 6,705,822
=============== ==============
</TABLE>
(6) SUBSEQUENT EVENT:
On April 1, 1998 the Company converted $740,000 of the $2 million of 8%
Subordinated Convertible Debentures (the " 8% Debentures") to 10%
Subordinated Convertible Debentures (the "10% Debentures") and issued
$150,000 of additional 10% Debentures. The 10% Debentures are
convertible into common stock of the Company at a conversion price of
$5.50 per share, accrue interest at 10% per annum which is payable
quarterly, mature on August 21, 2000 and extend the initial repayment
date by one year from August 1998 to August 1999. The 10% Debentures
are redeemable by the Company, in whole or in part, without premium or
penalty at any time on or after August 18, 1999, at their face amount
plus accrued and unpaid interest, if any, to the date of redemption.
The 10% Debentures are redeemable at the option of the holder, in whole
but not in part, without premium or penalty, at any time after August
21, 1999. As a result of the above transaction, $740,000 of the $2
million of 8% Debentures has been classified as long-term debt and the
remainder, payable in August 1998, has been classified as current
maturities of long-term debt in the accompanying condensed consolidated
balance sheet as of March 31, 1998.
(7) NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131
introduces a new model for segment reporting, called the "management
approach." The management approach is based on the way that management
organizes segments within a company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure - any manner
in which management disaggregates a company. The management approach
replaces the notion of industry and geographic segments in current
accounting standards. SFAS 131 is effective for fiscal years beginning
after December 15, 1997 and early adoption is encouraged. However, SFAS
131 need not be applied to interim statements in the initial year of
application. SFAS 131 requires restatement of all prior period
information reported. The Company intends to adopt this standard when
required and is in the process of determining the effect of SFAS 131 on
the Company's consolidated financial statements.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The statement is intended to eliminate
the diversity in practice in accounting for internal-use software costs
and improve financial reporting. The statement is effective for fiscal
years beginning after December 15, 1998. The Company is in the process
of determining the effect of this statement on the Company's
consolidated financial position and results of operations.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No person has been authorized to give any information or to CONSOLIDATED DELIVERY &
make any representations in connection with this offering other than Logistics, Inc.
those contained in this Prospectus and, if given or made, such other
information and representations must not be relied upon as having been
authorized by the Company. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company 5,000,000 Shares
since the date hereof or that the information contained herein is
correct as of any time subsequent to its date. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any COMMON STOCK
securities other than the registered securities to which it relates.
This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such
offer or solicitation is unlawful. _____________________________
PROSPECTUS
-----------------------------
---------
TABLE OF CONTENTS
Page
Prospectus Summary........................................ 2
Risk Factors.............................................. 4
Price Range of Common Stock............................... 8
Dividend Policy........................................... 8
Selected Financial Data................................... 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 12
Business.................................................. 18 , 1998
Management................................................ 25
Certain Transactions...................................... 33
Principal Stockholders.................................... 36
Description of Capital Stock.............................. 37
Description of Debentures ................................ 38
Shares Eligible for Future Sale .......................... 39
Legal Matters ............................................ 39
Experts .................................................. 40
Additional Information ................................... 40
Index to Financial Statements ............................ 40
</TABLE>
<PAGE>
Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article Seventh of the Company's Second Restated Certificate of
Incorporation provides that the Company shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of Delaware, as
amended from time to time, indemnify all directors and officers of the Company
whom it may indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware
permits a corporation, under specified circumstances, to indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been judged liable to the corporation unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Eighth of the Company's Second Restated Certificate of
Incorporation provides that the Company's directors will not be personally
liable to the Company or its stockholders for monetary damages resulting from
breaches of their fiduciary duty as director except (a) for any breach of the
duty of loyalty to the Company or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (c) under Section 174 of the General Corporation Law of the State of
Delaware, which makes directors liable for unlawful dividends or unlawful stock
repurchases or redemptions or (d) for transactions from which directors derive
improper personal benefit.
The Company maintains directors' and officers' liability insurance
which insures its directors and officers and the directors and officers of its
subsidiaries against certain liabilities in certain circumstances.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit Description
Number
2.1 Agreement and Plan of Reorganization, dated as of September
8, 1995, by and among Consolidated Delivery & Logistics,
Inc., American Courier Acquisition Corp., American Courier
Express, Inc. and the Stockholders named therein (filed as
Exhibit 2.1 to the Company's Registration Statement on Form S-1
(File No. 33-97008) and incorporated herein by reference)
2.2 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Bestway Distribution Acquisition Corp., Bestway Distribution
Services, Inc., Crown Courier Systems, Inc. and the Stockholders
named therein (filed as Exhibit 2.2 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
2.3 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc., Click
Messenger Acquisition Corp., Click Messenger Service, Inc., Click
Messenger Service of N.Y., Inc., Meteor Messenger Service, Inc.
(t/a Prime time), Cassidy, Ltd., DMK Services, Ltd. and the
Stockholders named therein (filed as Exhibit 2.3 to the Company's
Registration Statement on Form S-1 (File No. 33-97008) and
incorporated herein by reference).
2.4 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc., Court
Courier Acquisition Corp., Court Courier Systems, Inc., Court
Courier _ Revex of Connecticut, Inc. and the Stockholders named
therein (filed as Exhibit 2.4 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
2.5 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Distribution Solutions Acquisition Corp., Distribution Solutions
International, Inc. and the Stockholder named therein (filed as
Exhibit 2.5 to the Company's Registration Statement on Form S-1
(File No. 33-97008) and incorporated herein by reference).
2.6 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Clayton/National Acquisition Corp., Clayton/National Courier
Systems, Inc., National Express Company, Inc. and the Stockholders
named therein (filed as Exhibit 2.6 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
2.7 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Olympic Courier Acquisition Corp., Olympic Courier Systems, Inc.,
Qualco Courier Systems, Inc. and the Stockholders named therein
(filed as Exhibit 2.7 to the Company's Registration Statement on
Form S-1 (File No. 33-97008) and incorporated herein by
reference).
2.8 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Orbit/Lightspeed Acquisition Corp., Orbit/Lightspeed Courier
Systems, Inc., NWC Trucking Corp., BMBA, Inc., O/L Warehousing,
Inc. and the Stockholders named therein (filed as Exhibit 2.8 to
the Company's Registration Statement on Form S-1 (File No.
33-97008) and incorporated herein by reference).
2.9 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
Securities Courier Acquisition Corp., Securities Courier
Corporation and the Stockholder named therein (filed as Exhibit
2.9 to the Company's Registration Statement on Form S-1 (File No.
33-97008) and incorporated herein by reference).
2.10 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc., Silver
Star Acquisition Corp., Silver Star Express, Inc., All World
Brokers, Inc., Parcel Delivery Company of Florida, Inc., Silver
Star Express North, Inc. and the Stockholders named therein (filed
as Exhibit 2.10 to the Company's Registration Statement on Form
S-1 (File No.
33-97008) and incorporated herein by reference).
2.11 Agreement and Plan of Reorganization, dated as of September 8,
1995, by and among Consolidated Delivery & Logistics, Inc.,
SureWay Air Acquisition Corp., SureWay Air Traffic Corporation and
the Stockholders named therein (filed as Exhibit 2.11 to the
Company's Registration Statement on Form S-1 (File No. 33-97008)
and incorporated herein by reference).
2.12 Amendment, dated as of November 7, 1995, to Agreement and Plan of
Reorganization, dated as of September 8, 1995, by and among
Consolidated Delivery & Logistics, Inc., Click Messenger
Acquisition Corp., Click Messenger Service, Inc., Click Messenger
Service of N.Y., Inc., Meteor Messenger Service, Inc. (t/a Prime
time), Cassidy, Ltd., DMK Services, Ltd. and the Stockholders
named therein (filed as Exhibit 2.12 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
2.13 Amendment, dated as of November 7, 1995, to Agreement and Plan of
Reorganization, dated as of September 8, 1995, by and among
Consolidated Delivery & Logistics, Inc., Clayton/National
Acquisition Corp., Clayton/National Courier Systems, Inc.,
National Express Company, Inc. and the Stockholders named therein
(filed as Exhibit 2.13 to the Company's Registration Statement on
Form S-1 (File No. 33-97008)
and incorporated herein by reference).
2.14 Amendment, dated as of November 7, 1995, to Agreement and Plan of
Reorganization, dated as of September 8, 1995, by and among
Consolidated Delivery & Logistics, Inc., Orbit/Lightspeed
Acquisition Corp., Orbit/Lightspeed Courier Systems, Inc., NWC
Trucking Corp., BMBA, Inc., O/L Warehousing, Inc. and the
Stockholders named therein (filed as Exhibit 2.14 to the Company's
Registration Statement on Form
S-1 (File No. 33-97008) and incorporated herein by reference).
2.15 Amendment, dated as of October 10, 1995, to Agreement and Plan of
Reorganization, dated as of September 8, 1995, by and among
Consolidated Delivery & Logistics, Inc., Securities Courier
Acquisition Corp., Securities Courier Corporation and the
Stockholder named therein (filed as Exhibit 2.15 to the Company's
Registration Statement on Form S-1 (File No. 33-97008) and
incorporated herein by reference).
3.1 Second Restated Certificate of Incorporation of Consolidated
Delivery & Logistics, Inc. (filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No.
33-97008) and incorporated herein by reference).
3.2 Amended and Restated By-laws of Consolidated Delivery &
Logistics, Inc. (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No. 33-97008) and
incorporated herein by reference).
4.1 Form of certificate evidencing ownership of Common Stock of
Consolidated Delivery & Logistics, Inc. (filed as Exhibit
4.1 to the Company's Registration Statement on Form S-1
(File No. 33-97008) and incorporated herein by reference).
4.2 Instruments defining the rights of holders of the Company's
long-term debt (not filed pursuant to Regulation S-K Item
601((b)(4)(iii); to be furnished to the Commission upon request).
5.1 Opinion of Lowenstein Sandler PC*.
10.1 Consolidated Delivery & Logistics, Inc. Employee Stock
Compensation Program (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (File No. 33-97008) and
incorporated herein by reference).
10.2 Consolidated Delivery & Logistics, Inc. 1995 Stock Option
Plan for Independent Directors (filed as Exhibit 10. 2 to the
Company's Registration Statement on Form S-1 (File No.
33-97008) and incorporated herein by reference).
10.3 Employment Agreement, dated as of February 5, 1997, with
Albert W. Van Ness, Jr. is incorporated by reference to Exhibit
10.3 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.4 Loan and Security Agreement, dated July 14, 1997 by and between
First Union Commercial Corporation and Consolidated Delivery and
Logistics, Inc. and Subsidiaries (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the Fiscal quarter
ended June 30, 1997 and incorporated herein by reference).
10.5 Amendment, dated April 11, 1996, to Employment Agreement with John
Mattei (filed as Exhibit 10.5 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996 and
incorporated herein by reference).
10.6 Employment Agreement, dated as of September 8, 1995, with
William T. Brannan (filed as Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (File No. 33-97008) and
incorporated herein by reference).
10.7 Employment Agreement, dated as of September 8, 1995, with Joseph
G. Wojak (filed as Exhibit 10.7 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
10.8 Employment Agreement, dated as of September 15, 1995, with William
Beaury (filed as Exhibit 10.9 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
10.9 Amendment to Loan and Security Agreement, dated September 30, 1997
By and Between First Union Commercial Corporation and Consolidated
Delivery & Logistics, Inc. and Subsidiaries (filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997 and incorporated herein by
reference).
10.10 Employment Agreement, dated as of September 15, 1995, with Michael
Brooks (filed as Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
10.11 Asset Purchase Agreement dated December 31, 1997 by and among
Consolidated Delivery & Logistics, Inc., Mimatar Corporation and
Sureway Logistics Corporation (filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K filed on January 15, 1998 and
incorporated herein by reference).
10.12 Promissory Note dated December 31, 1997 by and between Mimatar
Corporation and Sureway Logistics Corporation (filed as
Exhibit 10.2 to the Company's Current Report on Form 8-K filed
on January 15, 1998 and incorporated herein by reference).
10.13 Consulting Agreement, dated July 27, 1997, by and between
Clayton/National Courier Systems, Inc., and Labe Leibowitz is
incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
10.14 Amendment, dated December 23, 1997, to Employment Agreement with
Al Van Ness, Jr., is incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
10.15 Employment Agreement, dated as of September 15, 1995, with Robert
Wyatt (filed as Exhibit 10.35 to the Company's Registration
Statement on Form S-1 (File No. 33-97008) and incorporated herein
by reference).
21.1 List of subsidiaries of Consolidated Delivery & Logistics, Inc.
(filed as Exhibit 21.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 and incorporated herein
by reference).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Lowenstein Sandler PC (contained in Exhibit 5.1)*.
24.1 Power of Attorney.
(b) Financial Statement Schedules
The following financial statement schedules are filed herewith:
Schedule Description
II Valuation and Qualifying Accounts
*Previously filed.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any acts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(c) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415 will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
equally prompt means. This includes information contained in the documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this post-effective amendment to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Clifton, State of New Jersey, on August 6, 1998.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
By: \s\ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirement of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed by the
following persons in the capacities indicated on August 6, 1998.
Signature Capacity
\s\ Albert W. Van Ness, Jr. Chairman of the Board, Chief
Albert W. Van Ness, Jr. Executive Officer (Principal
Executive Officer), Chief Financial
Officer and Director
*______________________ Director
William T. Beaury
*______________________ President, Chief Operating Officer
William T. Brannan and Director
*_______________________ Director
Michael Brooks
*_______________________ Director
Jon F. Hanson
*_______________________ Director
Labe Leibowitz
*_______________________ Director
Marilu Marshall
*_______________________ Director
Kenneth W. Tunnell
*______________________ Director
John S. Wehrle
* By:
\s\ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Attorney-in-Fact
<PAGE>
<TABLE>
<CAPTION>
Schedule II
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance Charged Balance
at to Costs at End
Beginning and Write-offs Other of
Description of Period Expenses (a) (b) Period
- ------------------------------- --------------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1997 -
Allowance for doubtful
accounts $1,598 $1,117 ($1,282) $- $1,433
=============== ============== ============== ============= =============
For the year ended
December 31, 1996 -
Allowance for doubtful
accounts $1,249 $1,315 ($966) $- $1,598
=============== ============== ============== ============= =============
For the year ended
December 31, 1995 -
Allowance for doubtful
accounts $- $174 ($54) $1,129 $1,249
=============== ============== ============== ============= =============
</TABLE>
(a) Represents write-offs net of recoveries.
(b) Represents the addition of the Founding Companies.
<PAGE>
INDEX TO EXHIBITS
Exhibits
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney.
<PAGE>
Exhibit 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Consolidated Delivery & Logistics, Inc.:
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
\s\ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
July 31, 1998
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
WHEREAS, the undersigned officers and directors of
Consolidated Delivery & Logistics, Inc. (the "Company") desire to authorize
Albert W. Van Ness, Jr. and William T. Brannan to act as their
attorneys-in-fact and agents, for the purpose of executing and filing the
registration statement described below, including all amendments and
supplements thereto,
NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Albert W. Van Ness, Jr. and
William T. Brannan, and each of them, his true and lawful attorney-in-fact agent
agent, with full power of substitution and resubstitution, to sign the
registrant's to sign the registrant's Post-Effective Amendment No. 1 to its
Registration Statement on Form S-4, including any and all additional
post-effective amendments and supplements thereto, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this power
of attorney in the following capacities as of the 17 day of June, 1998.
SIGNATURE TITLE
\s\ Albert W. Van Ness, Jr. Chairman of the Board, Chief
Albert W. Van Ness, Jr. Executive Officer and Chief Financial
Officer
\s\ William T. Brannan Chief Operating Officer and Director
William T. Brannan
\s\ William Beaury Director
William Beaury
\s\ Michael Brooks Director
Michael Brooks
\s\ Labe Leibowitz Director
Labe Leibowitz
<PAGE>
\s\ Jon F. Hanson Director
Jon F. Hanson
\s\ Marilu Marshall Director
Marilu Marshall
\s\ Kenneth W. Tunnell Director
Kenneth W. Tunnell
\s\ John S. Wehrle Director
John S. Wehrle
